
ACL			Allowance for credit losses
ADR			Average daily revenue
AFS			Available for sale
AIR			Accrued interest receivable
ALCO			Asset/Liability Committee
ALLL			Allowance for loan and lease losses
ALM			Asset/liability management
AMERIBOR			American Interbank Offered Rate
AOCI			Accumulated other comprehensive income
ARRC			Alternative Reference Rates Committee
ASC			FASB Accounting Standards Codification
Associate			Person employed by FHN
ASU			Accounting Standards Update
Bank			First Horizon Bank
BOLI			Bank-owned life insurance
BSBY			Bloomberg short-term bank yield index
C&I			Commercial, financial, and industrial loan portfolio
CARES Act			Coronavirus Aid, Relief, and Economic Security Act
CBF			Capital Bank Financial
CCAR			Comprehensive Capital Analysis and Review
CD			Certificate of deposit
CECL			Current expected credit loss
CEO			Chief Executive Officer
CFPB			Consumer Financial Protection Bureau
CMO			Collateralized mortgage obligations
Company			First Horizon Corporation
Corporation			First Horizon Corporation
CRA			Community Reinvestment Act
CRE			Commercial Real Estate loan portfolio
CRMC			Credit Risk Management Committee
DSCR			Debt service coverage ratios
DTA			Deferred tax asset
~~DTI~~			~~Debt-to-income~~
DTL			Deferred tax liability
EPS			Earnings per share
ESOP			Employee stock ownership plan
FASB			Financial Accounting Standards Board
~~FDIC~~			~~Federal Deposit Insurance Corporation~~


FDIC			Federal Deposit Insurance Corporation
Federal Reserve			Federal Reserve Board
FFP			Federal funds purchased
FFS			Federal funds sold
FHA			Federal Housing Administration
FHLB			Federal Home Loan Bank
FHLMC / Freddie Mac			Federal Home Loan Mortgage Corporation
FHN			First Horizon Corporation
FHNF			FHN Financial; FHN's fixed income division
FICO			Fair Isaac Corporation
FINRA			Financial Industry Regulatory Authority
FNMA / Fannie Mae			Federal National Mortgage Association
First Horizon			First Horizon Corporation
FRB			Federal Reserve Bank or the Federal Reserve Board
FTBNA			First Tennessee Bank National Association (former name of the Bank)
FTE			Fully taxable equivalent
FTHC			First Tennessee Housing Corporation
FTNF			FTN Financial (former name of FHNF)
FTNMC			First Tennessee New Markets Corporation
FTRESC			FT Real Estate Securities Company, Inc.
GAAP			Generally accepted accounting principles (U.S.)
GNMA			Government National Mortgage Association or Ginnie Mae
GSE			Government sponsored enterprises, in this report references Fannie Mae and Freddie Mac
HELOC			Home equity line of credit
HFS			Held for Sale
HTM			Held to maturity
HUD			Department of Housing and Urban Development
IBKC			IBERIABANK Corporation
IBKC merger			FHN's merger of equals with IBKC that closed July 2020
ISDA			International Swap and Derivatives Association
~~IRS~~			~~Internal Revenue Service~~


IRS			Internal Revenue Service
LGD			Loss given default
LIBOR			London Inter-Bank Offered Rate
LIHTC			Low Income Housing Tax Credit
LLC			Limited Liability Company
LMC			Loans to mortgage companies
LOCOM			Lower of cost or market
LRRD			Loan Rehab and Recovery Department
LTV			Loan-to-value
MBS			Mortgage-backed securities
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
MSR			Mortgage servicing rights
MSRB			Municipal Securities Rulemaking Board
NAICS			North American Industry Classification System
NII			Net interest income
NIM			Net interest margin
NM			Not meaningful
NMTC			New Market Tax Credit
NOL			Net operating loss
NPA			Nonperforming asset
Non-PCD			Non-Purchased Credit Deteriorated Financial Assets
NPL			Nonperforming loan
NSF			Non-sufficient funds
OCC			Office of the Comptroller of the Currency
OIS			Overnight indexed swap
OREO			Other Real Estate Owned
OTC			One-time close, a mortgage product which allowed simplified conversion of a construction loan to permanent financing
OTTI			Other than temporary impairment
PCAOB			Public Company Accounting Oversight Board
PCD			Purchased Credit Deteriorated Financial Assets
PCI			Purchased credit impaired
PD			Probability of default
PM			Portfolio managers
PPP			Paycheck Protection Program
PSU			Performance Stock Unit
RE			Real estate
RM			Relationship managers
ROA			Return on assets
~~ROCE~~			~~Return on average common shareholders' equity~~


ROCE			Return on average common shareholders' equity
ROTCE			Return on tangible common equity
~~ROU~~			~~Right-of-use~~
RPL			Reasonably Possible Loss
RSU			Restricted stock unit
RULC			Reserve for unfunded lending commitments
RWA			Risk-weighted assets
SBA			Small Business Administration
SEC			Securities and Exchange Commission
SOFR			Secure Overnight Funding Rate
SVaR			Stressed Value-at-Risk
TA			Tangible assets
TCE			Tangible common equity
TDR			Troubled Debt Restructuring
TRUP			Trust preferred loan
UPB			Unpaid principal balance
USDA			United States Department of Agriculture
VaR			Value-at-Risk
VIE			Variable Interest Entities
we / us / our			First Horizon Corporation

This report, including material incorporated into it, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements pertain to FHN's beliefs, plans, goals, expectations, and estimates. Forward-looking statements are not a representation of historical information, but instead pertain to future operations, strategies, financial results, or other developments. Forward-looking statements can be identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” “is likely,” “will,” “going forward,” and other expressions that indicate future events and trends.

Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, operational, economic, and competitive uncertainties and contingencies, many of which are beyond FHN’s control, and many of which, with respect to future business decisions and actions (including acquisitions and divestitures), are subject to change and could cause FHN’s actual future results and outcomes to differ materially from those contemplated or implied by forward-looking statements or historical performance. Examples of uncertainties and contingencies include, among other important factors:

•the possibility that the anticipated benefits of the IBKC merger will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in any or all of FHN’s market areas;

•the possibility that the IBKC merger may be more expensive to integrate than anticipated, including as a result of unexpected factors or events;

•potential adverse reactions or changes to business or associate relationships resulting from the IBKC merger;

•the potential impacts on FHN’s businesses and clients of the COVID-19 pandemic, including negative impacts from quarantines and other public restrictions, market declines and volatility, and changes in client behavior;

•potential claims ~~alleging mortgage servicing failures, individually, on a class basis, or as master servicer of securitized loans;~~

•~~potential claims~~ relating to participation in government programs, especially lending or other financial services programs;

•global, general and local economic and business conditions, including economic recession or depression;

•the stability or volatility of values and activity in the residential housing and commercial real estate markets;

•expectations of and actual timing and amount of interest rate movements, including the slope and shape of the yield curve, which can have a significant impact on a financial services institution;

•market and monetary fluctuations, including fluctuations in mortgage markets;

•the financial condition of borrowers and other counterparties;

•competition within and outside the financial services industry;

•the occurrence of natural or man-made disasters, including pestilence, conflicts, or terrorist attacks, or other adverse external events;

•the effectiveness and cost-efficiency of FHN’s hedging practices;

•fraud, theft, or other incursions through conventional, electronic, or other means directly or indirectly affecting FHN or its clients, business service-providers and other counterparties, or competitors;

•FHN’s ability to adapt products and services to changing industry standards and client preferences;

•risks inherent in originating, selling, servicing, and holding loans and loan-based assets, including prepayment risks, pricing concessions, fluctuation in U.S. housing and other real estate prices, fluctuation of collateral values, and changes in client profiles;

•potential claims alleging mortgage servicing failures, individually, on a class basis, or as master servicer of securitized loans;

•changes in the regulation of the U.S. financial services industry;

•changes in laws, regulations, and administrative actions, including executive orders, whether or not specific to the financial services industry;

•changes in accounting policies, standards, and interpretations;

•evolving capital and liquidity standards under applicable regulatory rules;

•accounting policies and processes requiring management to make estimates about matters that are uncertain; and

•other factors that may affect the future results of FHN.

FHN cautions readers of this report that the list above is not exhaustive as of the date of this report. Further,

FHN assumes no obligation to update or revise any forward-looking statements that are made in this report or in any other statement, release, report, or filing from time to time. Actual results could differ and FHN’s estimates and expectations could change, possibly materially, because of one or more factors, including those factors listed above or presented elsewhere in this report or those factors listed in material incorporated by reference into this report. In evaluating forward-looking statements and assessing FHN’s prospects, readers of this report should carefully consider the factors mentioned above along with the additional risk and uncertainty factors discussed in Item 1A of Part II of this report and in the forepart, and in Items 1, 1A, and 7, of FHN’s most recent Annual Report on Form 10-K, along with any additional factors which might materially affect future results and outcomes.

Certain measures included in this report are “non-GAAP,” meaning they are not presented in accordance with U.S. GAAP and also are not codified in U.S. banking regulations currently applicable to FHN. Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the financial condition, capital position, and financial results of FHN and its business segments. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

The non-GAAP measures presented in this report are: pre-provision net revenue, return on average tangible common equity, tangible common equity to tangible assets, adjusted tangible common equity to risk-weighted assets, ~~and~~ tangible book value per common ~~share.~~share, and loans and leases excluding PPP loans. Table 2024 appearing in the MD&A (Item 2 of Part I) of this report provides a reconciliation of non-GAAP items presented in this report to the most comparable GAAP presentation.

Presentation of regulatory measures, even those which are not GAAP, provide a meaningful base for comparability to other financial institutions subject to the same regulations as FHN, as demonstrated by their use by banking regulators in reviewing capital adequacy of financial institutions. Although not GAAP terms, these regulatory measures are not considered “non-GAAP” under U.S. financial reporting rules as long as their presentation conforms to regulatory

standards. Regulatory measures used in this report include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; tier 1 capital, generally defined as the sum of core capital (including common equity and instruments that cannot be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations; and risk-weighted assets, which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes necessary for complete financial statements in accordance with GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all significant adjustments, consisting of normal and recurring items, considered necessary for fair presentation. These interim financial statements should be read in conjunction with FHN's audited consolidated financial statements and notes in FHN's Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.

All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts reported in prior years have been reclassified to conform to the current period presentation. See the Glossary of Acronyms and Terms included in this Report for terms used herein.

Accounting Changes With Extended Transition Periods

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides several optional expedients and exceptions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The provisions of ASU 2020-04 primarily affect 1) contract modifications (e.g., loans, leases, debt, and derivatives) made in anticipation that a reference rate (e.g., LIBOR) will be discontinued and 2) the application of hedge accounting for existing relationships affected by those modifications. The provisions of ASU 2020-04 are effective upon release and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. FHN has ~~been identifying~~identified contracts affected by reference rate reform and ~~developing~~developed modification plans for

~~plans for~~ those contracts. FHN has elected to utilize the optional expedients and exceptions provided by ASU 2020-04 for certain contract ~~modifications.~~modifications that have already been implemented. FHN anticipates that it will continue to utilize the expedients and exceptions for future modifications in situations where they mitigate potential accounting outcomes that do not faithfully represent management’s intent or risk management activities, consistent with the purpose of the standard.

In January 2021, the FASB issued ASU 2021-01, "Scope" to expand the scope of ASU 2020-04 to apply to certain contract modifications that were implemented in October 2020 by derivative clearinghouses for the use of Secure Overnight Funding Rate (SOFR) in discounting, margining and price alignment for centrally cleared derivatives, including derivatives utilized in hedging relationships. ASU 2021-01 also applies to derivative contracts affected by the change in discounting convention regardless of whether they are centrally cleared (i.e., bi-lateral contracts can also be modified) and regardless of whether they reference LIBOR. ASU 2021-01 was effective immediately upon issuance with retroactive application permitted. FHN elected to retroactively apply the provisions of ASU 2021-01 because FHN's centrally cleared derivatives were affected by the change in discounting convention and because FHN has other bi-lateral derivative contracts that may be modified to conform to the use of SOFR for discounting. Adoption did not have a significant effect on FHN's reported financial condition or ~~earnings.~~results of operations.

On July 1, 2020, FHN and IBERIABANK Corporation closed their merger-of-equals transaction. FHN issued approximately 243 million shares of FHN common stock, plus 3 new series of preferred stock (Series B, Series C, and Series D) in a transaction valued at $2.5 billion. At the time of closing, IBKC operated 319 offices in 12 states, mostly in the southern U.S.

The merger-of-equals transaction ~~has been~~was accounted for as a business combination.

Accordingly, the assets acquired and liabilities assumed are generally

presented at their fair values as of the merger date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change.

In relation to the merger-of-equals transaction, FHN recorded a ~~preliminary $533~~$531 million purchase accounting gain, ~~in 2020 and an additional $1 million purchase accounting gain during the first quarter of 2021,~~ representing the shortfall of the purchase price under the acquisition accounting value of net assets

acquired, net of deferred taxes. The ~~preliminary~~ purchase accounting gain is not taxable. Due to the fact that certain back office functions (including loan processing) have not been integrated, the ongoing evaluation of post-merger activity, and the extended information gathering and management review

December 31, 2020, the valuation of the acquired assets and liabilities assumed from the Truist branches acquisition was final. In relation to the acquisition, FHN recorded $78 million in goodwill, representing the excess of acquisition consideration over the estimated fair value of net assets acquired. All goodwill has been attributed to FHN's Regional

Banking segment (refer to Note 7 - Goodwill and Other Intangible Assets for additional information). This goodwill was the result of expected synergies, operational efficiencies and other factors.

Expenses related to FHN's merger and integration activities are recorded in FHN's Corporate segment.

In addition to the transactions mentioned above, FHN acquires or divests assets from time to time in transactions that are considered business combinations or divestitures but are not material to FHN individually or in the aggregate.

FHN has evaluated all AFS debt securities that were in unrealized loss positions in accordance with its accounting policy for recognition of credit losses. No AFS debt securities were determined to have credit losses because the primary cause of the decline in value was attributable to changes in interest rates. Total AIR not included in

the fair value or amortized cost basis of AFS debt securities was ~~$24~~$23 million and $22 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Consistent with FHN's review of the related securities, there were no credit-related write downs of AIR for AFS debt securities during the reporting period. Additionally, for AFS debt securities with unrealized losses, FHN does not intend to sell

The loans and lease portfolio is disaggregated into portfolio segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally a disaggregation of a portfolio segment and is generally determined based on risk characteristics of the loan and FHN’s method for monitoring and assessing credit risk and performance. FHN's loan and lease portfolio segments are commercial and consumer. The classes of loans and leases are: (1)

commercial, financial, and industrial, which includes commercial and industrial loans and leases and loans to mortgage companies, (2) commercial real estate, (3) consumer real estate, which includes both real estate installment and home equity lines of credit, and (4) credit card and other.

The following table provides the amortized cost basis of loans and leases by portfolio segment and class as of ~~March 31,~~September 30, 2021 and December 31, 2020, excluding accrued interest of ~~$182~~$143 million and $180 million, respectively, which is included in ~~Other~~other assets in the Consolidated Balance Sheets.

Restrictions

Loans and leases with carrying values of ~~$38.1 million~~$37.4 billion and $38.6 billion were pledged as collateral for borrowings at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Concentrations of Credit Risk

Most of ~~the~~ FHN’s business activity is with clients located in the southern United States. FHN’s lending activity is concentrated in its market areas within those states. As of ~~March 31,~~September 30, 2021, FHN had loans to mortgage companies of ~~$5.5~~$5.1 billion and loans to finance and insurance companies of ~~$3.1~~$3.2 billion. As a result, ~~25%~~26% of the C&I portfolio is sensitive to impacts on the financial services industry.

Credit Quality Indicators

FHN employs a dual grade commercial risk grading methodology to assign an estimate for the probability

of default and the loss given default for each commercial loan using factors specific to various industry, portfolio, or product segments that result in a rank ordering of risk and the assignment of grades PD 1 to PD 16. This credit grading system is intended to identify and measure the credit quality of the loan and lease portfolio by analyzing the migration between grading categories. It is also integral to the estimation methodology utilized in determining the ALLL since an allowance is established for pools of commercial loans based on the credit grade assigned. Each PD grade corresponds to an estimated one-year default probability percentage. PD grades are continually evaluated but require a formal scorecard annually. As a response to the COVID-19 pandemic, FHN identified a segment of its commercial portfolio that requires a quarterly ~~re-~~re-grading process. As borrowers recover, they can be removed from the quarterly re-grading process with credit officer concurrence.

~~grading process. As borrowers recover, they can be removed from the quarterly re-grading process with credit officer concurrence.~~

PD 1 through PD 12 are “pass” grades. PD grades 13-16 correspond to the regulatory-defined categories of special mention (13), substandard (14), doubtful (15), and loss (16). Special mention loans and leases have potential weaknesses that, if left uncorrected, may result in deterioration of FHN's credit position at some future date. Substandard commercial loans and

leases have well-defined weaknesses and are

characterized by the distinct possibility that FHN will sustain some loss if the deficiencies are not corrected. Doubtful commercial loans and leases have the same weaknesses as substandard loans and leases with the added characteristics that the probability of loss is high and collection of the full amount is improbable.

The consumer portfolio is comprised primarily of smaller-balance loans which are very similar in nature in that most are standard products and are backed by residential real estate. Because of the similarities of consumer loan-types, FHN is able to utilize the FICO score, among other attributes, to assess the credit quality of consumer borrowers. FICO scores are refreshed on a quarterly basis in an attempt to reflect the recent risk profile of the borrowers. Accruing delinquency amounts are indicators of asset quality within the credit card and other consumer portfolio.

The following table reflects the amortized cost basis by year of origination and refreshed FICO scores for

consumer real estate loans as of ~~March 31,~~September 30, 2021

and December 31, 2020. Within consumer real estate, classes include HELOC and real estate installment. HELOCs are loans which during their draw period are classified as revolving loans. Once the draw period ends and the loan enters its repayment period, the loan converts to a term loan and is classified as a revolving ~~loans~~loan converted to a term ~~loans.~~loan. All loans classified in the following tables as revolving loans or revolving loans converted to term loans are HELOCs. Real estate installment loans are originated as a fixed term ~~loan~~loans and are classified below in their vintage year. All loans in the following tables classified in a vintage year are real estate installment loans.

Loans and leases are placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or on a case-by-case basis if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccrual are loans for which FHN continues to receive payments including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy.

Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. In accordance with revised Interagency Guidance issued in 2020, FHN is

not required to designate loans with deferrals granted in response to COVID-19 as past due because of such deferrals. If a borrower defers payment, this may result in no contractual payments being past due, and as such, loans would not be considered past due during the period of deferral, and as a result, are excluded from loans past due 30-89 days and loans 90+ days past due in the tables below.

~~(b) C&I loans include TRUPs loans of $210 million, which is net of an amortizing discount of $18 million.~~

Collateral-Dependent Loans

Collateral-dependent loans are defined as loans for which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty. At a minimum, the estimated value of the collateral for each loan equals the current book value.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, FHN had commercial loans with amortized cost of ~~approxima~~appro~~tely $247~~ximately $174 million and $167 million, respectively, that ~~was~~were based on the value of underlying collateral. Collateral-dependent C&I and CRE loans totaled ~~$180~~$161 million and ~~$67~~$13 million, ~~respectively,~~respectively, at ~~March 31,~~September 30, 2021. The collateral for these loans generally consists of business assets including land, buildings, equipment and financial assets. During the three and nine months ended ~~March 31,~~September 30, 2021, FHN recognized charge-offs of approximately ~~$13~~$9 million and $25 million, respectively, on these loans related to reductions in estimated collateral values.

Consumer HELOC and real estate installment loans with amortized cost based on the ~~value~~value of underlying real estate collateral were ~~approximately $9~~approximately $8 million and ~~$24~~$21 million, respectively, as of ~~March 31,~~September 30, 2021, and $9 million and $26 million, respectively, as of December 31, 2020. Charge-offs during the three and nine months ended ~~March 31,~~September 30, 2021 were not significant for collateral-dependent consumer loans.

Troubled Debt Restructurings

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined

that FHN has granted a concession to the borrower. FHN may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future. Many aspects of a borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions could include extension of the maturity date, reductions of the interest rate (which may make the rate lower than current market for a

new loan with similar risk), reduction or forgiveness of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR. In accordance with regulatory guidance, certain loan modifications that might ordinarily have qualified as TDRs were not accounted for as TDRs and have been excluded from the disclosures below. For loan modifications that were made during the three and nine months ended ~~March 31,~~September 30, 2021 or the year ended December 31, 2020 that met the TDR relief provisions outlined in either the CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has excluded these modifications from consideration as TDRs, and has excluded loans with these qualifying modifications from designation as TDRs in the information and discussion that follows.

On ~~March 31,~~September 30, 2021 and December 31, 2020, FHN had ~~$288~~$239 million and $307 million of portfolio loans classified as TDRs, respectively. ~~For TDRs in the loan portfolio, FHN had loan loss reserves of $11 million, or 4% as of March 31, 2021, and $12 million, or 4% as of December 31, 2020.~~ Additionally, ~~$41~~$37 million and $42 million of loans held for sale as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, were classified as TDRs.

Management's estimate of expected credit losses in the loan and lease portfolios is recorded in the ALLL and the RULC, collectively the ACL. The ALLL and the RULC are reported on the Consolidated Balance Sheets in the ~~Allowance~~allowance for loan and lease losses and in ~~Other~~other liabilities, respectively. Provision for credit losses related to the loans and leases portfolio and the unfunded lending commitments are reported in the Consolidated Statements of Income as ~~Provision~~provision for credit losses.

The ACL is maintained at a level management believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the loan and lease portfolio and unfunded lending commitments. The determination of the ACL is based on periodic evaluation of the loan and lease portfolios and unfunded lending commitments considering a number of relevant ~~underling~~underlying factors, including key assumptions and evaluation of quantitative and qualitative information.

In accordance with its accounting policy elections, FHN does not recognize a separate allowance for expected credit losses for AIR and records reversals

of AIR as reductions of interest income. FHN reverses previously accrued but uncollected interest when an asset is placed on nonaccrual status. As of ~~March 31,~~September 30, 2021 and December 31, 2020, FHN recognized approximately $1 million in allowance for expected credit losses on COVID-19 deferrals that do not qualify for the election which is not reflected in the table below. AIR and the related allowance for expected credit losses is included as a component of ~~Other~~other assets.

The total amount of interest reversals from loans placed on nonaccrual status and the amount of income recognized on nonaccrual loans during the three and nine months ended ~~ended March 31,~~September 30, 2021 and 2020 were not material.

Expected credit losses for unfunded commitments are estimated for periods where the commitment is not unconditionally cancellable. The measurement of expected credit losses for unfunded commitments mirrors that of loans and leases with the additional estimate of future draw rates (timing and amount).

On July 1, 2020, as part of the IBKC merger, FHN obtained IBKC's mortgage banking operations which includes origination and servicing of residential first lien mortgages that conform to standards established by GSEs that are major investors in U.S. home mortgages but can also consist of junior lien and jumbo loans secured by residential property. These loans are primarily sold to private companies that are unaffiliated with the GSEs on a servicing-released basis. Gains and losses on these mortgage loans are included in ~~Mortgage~~mortgage banking and title income on the

Consolidated Statements of Income. Prior to the merger, FHN’s mortgage banking operations were not ~~significant; however, at March 31,~~significant. At September 30, 2021, FHN had approximately ~~$53~~$48 million of loans that remained from pre-2009 Mortgage Business operations. Activity related to the pre-2009 mortgage loans was primarily limited to payments and write-offs in 2020 and 2021, with no new originations or loan sales, and only an insignificant amount of repurchases. These loans are excluded from the disclosure below.

On July 1, 2020, FHN completed its merger-of-equals transaction with IBKC. In connection with the merger, FHN recorded a ~~$534~~$531 million purchase accounting gain, based on ~~preliminary~~ fair value estimates.

On July 17, 2020, FHN completed its purchase of 30 branches from Truist Bank. In relation to the acquisition, FHN recorded $78 million in goodwill, based on fair value estimates. See Note 2 - Acquisitions and Divestitures for additional information regarding these transactions.

FHN performed the required annual goodwill impairment test as of October 1, 2020. The annual impairment test did not indicate impairment in any of FHN’s reporting units as of the testing date. Following the testing date, management evaluated the events and circumstances that could indicate that goodwill might be impaired and concluded that a subsequent interim test was not necessary. FHN is currently in the process of performing its annual impairment test as of October 1, 2021.

As further discussed in Note 13 - Business Segment Information, FHN reorganized its management reporting structure during ~~the fourth quarter of~~ 2020 and, accordingly, its segment reporting structure and goodwill reporting units. In connection with the reorganization, management reallocated goodwill to the new reporting units using a relative fair value approach.

Accounting estimates and assumptions were made about FHN’s future performance and cash flows, as well as other prevailing market factors (e.g., interest rates, economic trends, etc.) when determining fair value as part of the goodwill impairment test. While management used the best information available to estimate future performance for each reporting unit, future adjustments to management’s projections may be necessary if conditions differ substantially from the assumptions used in making the estimates.

During the second quarter of 2021, FHN issued $150 million of 4.70% Series F Non-Cumulative Perpetual Preferred Stock (the Series F Preferred Stock). The Series F Preferred Stock is redeemable at FHN's option, in whole or in part, on or after July 10, 2026. Earlier redemption is possible, at FHN's election, if certain regulatory capital events occur. The $145 million carrying value of the Series F Preferred Stock currently qualifies as Tier 1 Capital.

During the third quarter of 2021, FHN redeemed all outstanding shares of Series A Preferred Stock. The difference between the $100 million liquidation preference and the carrying value of the Series A Preferred Stock resulted in a $5 million deemed dividend that was included in EPS for the nine months ended September 30, 2021.

Subsidiary Preferred Stock

First Horizon Bank has issued 300,000 shares of Class A Non-Cumulative Perpetual Preferred Stock (Class A Preferred Stock) with a liquidation preference of $1,000 per share. Dividends on the Class A Preferred Stock, if declared, accrue and are payable each quarter, in arrears, at a floating rate equal to the greater of the three month LIBOR plus 0.85% or 3.75% per annum. These securities qualify fully as Tier 1 capital for both First Horizon Bank ~~while for FHN they qualify partially as Tier 1 capital~~ and ~~partially as Tier 2 capital.~~FHN. On ~~March 31,~~September 30, 2021 and December 31,

2020, $295 million of Class A Preferred Stock was recognized as ~~Noncontrolling~~noncontrolling interest on the Consolidated Balance Sheets.

CONTINGENCIES

Contingent Liabilities Overview

Contingent liabilities arise in the ordinary course of business. Often they are related to lawsuits, arbitration, mediation, and other forms of litigation. Various litigation matters currently are threatened or pending against FHN and its subsidiaries. Also, FHN at times receives requests for information, subpoenas, or other inquiries from federal, state, and local regulators, from other government authorities, and from other parties concerning various matters relating to FHN’s current or former businesses. Certain matters of that sort are pending at most times, and FHN generally cooperates when those matters arise. Pending and threatened litigation matters sometimes are settled by the parties, and sometimes pending matters are resolved in court or before an arbitrator, or are withdrawn. Regardless of the manner of resolution, frequently the most significant changes in status of a matter occur over a short time period, often following a lengthy period of little substantive activity. In view of the inherent difficulty of predicting the outcome of these matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories or involve a large number of parties, or where claims or other actions may be possible but have not been brought, FHN cannot reasonably determine what the eventual outcome of the matters will be, what the timing of the ultimate resolution of these matters may be, or what the eventual loss or impact related to each matter may be. FHN establishes a loss contingency liability for a litigation matter when loss is both probable and reasonably estimable as prescribed by applicable financial accounting guidance. If loss for a matter is probable and a range of possible loss outcomes is the best estimate available, accounting guidance requires a liability to be established at the low end of the range.

Based on current knowledge, and after consultation with counsel, management is of the opinion that loss contingencies related to threatened or pending litigation matters should not have a material adverse effect on the consolidated financial condition of FHN but may be material to FHN’s operating results for any particular reporting period depending, in part, on the results from that period.

Material Loss Contingency Matters

Summary

As used in this Note, except for matters that are reported as having been substantially settled or otherwise substantially resolved, FHN's “material loss

contingency matters” generally fall into at least one of the following categories: (i) FHN has determined material loss to be probable and has established a material loss liability in accordance with applicable financial accounting guidance; (ii) FHN has determined material loss to be probable but is not reasonably able to estimate an amount or range of material loss liability; or (iii) FHN has determined that material loss is not probable but is reasonably possible, and the amount or range of that reasonably possible material loss is estimable. As defined in applicable accounting guidance, loss is reasonably possible if there is more than a remote chance of a material loss outcome for FHN. FHN provides contingencies note disclosures for certain pending or threatened litigation matters each quarter, including all matters mentioned in categories (i) or (ii) and, occasionally, certain matters mentioned in category (iii). In addition, in this Note, certain other matters, or groups of matters, are discussed relating to FHN’s pre-2009 mortgage origination and servicing businesses. In all litigation matters discussed in this Note, unless settled or otherwise resolved, FHN believes it has meritorious defenses and intends to pursue those defenses vigorously.

FHN reassesses the liability for litigation matters each quarter as the matters progress. At ~~March 31,~~September 30, 2021, the aggregate amount of liabilities established for all such loss contingency matters was $1 million. These liabilities are separate from those discussed under the heading “Mortgage Loan Repurchase and Foreclosure Liability” below.

In each material loss contingency matter, except as otherwise noted, there is more than a remote chance that any of the following outcomes will occur: the plaintiff will substantially prevail; the defense will substantially prevail; the plaintiff will prevail in part; or the matter will be settled by the parties. At ~~March 31,~~September 30, 2021, FHN estimates that for all material loss contingency matters, estimable reasonably possible losses in future periods in excess of currently established liabilities could aggregate in a range from 0zero to ~~less than $1~~$6 million.

As a result of the general uncertainties discussed above and the specific uncertainties discussed for each matter mentioned below, it is possible that the ultimate future loss experienced by FHN for any particular matter may materially exceed the amount, if any, of currently established liability for that matter.

Exposures from pre-2009 Mortgage Business

FHN is contending with indemnification claims related to "other whole loans sold," which were mortgage

~~Material Matters~~

~~A former shareholder of CBF has filed a putative class action suit,~~ ~~Searles v. DeMartini et al~~, No. 2020-0136 (Del. Chancery), against certain former directors, officers, and shareholders of CBF, alleging, among other things, that defendants breached certain fiduciary duties in connection with CBF's merger with FHN in 2017. Plaintiff claims unspecified damages related to the merger consideration and opportunity loss. FHN is unable to estimate an RPL range for this matter due to significant uncertainties regarding: whether a class will be certified and, if so, the composition of the class; the amount of potential damages that might be awarded, if any; of any such damages amount, the amount that FHN would be obliged to indemnify; whether applicable insurance will be sufficient to cover FHN's exposure; and the outcome of discovery.

~~Exposures from pre-2009 Mortgage Business~~

~~FHN is contending with indemnification claims related to "other whole loans sold," which were mortgage~~ loans originated by FHN before 2009 and sold outside of ~~an FHN securitization.~~a securitization organized by FHN. These claims generally assert that FHN-originated loans contributed to losses in connection with mortgage loans securitized by the buyer of the loans. The claims generally do not include specific deficiencies for specific loans sold by FHN. Instead, the claims generally assert that FHN is liable for a share of the claimant's loss estimated by assessing the totality of the other whole loans sold by FHN to claimant in relation to the totality of the larger number of loans securitized by claimant. FHN is unable to estimate an RPL range for these matters due to significant uncertainties regarding: the number of, and the facts underlying, the loan originations which claimants assert are indemnifiable; the applicability of FHN’s contractual indemnity covenants to those facts and originations; and, in those cases where an indemnity claim may be supported, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.

FHN also has indemnification claims related to servicing obligations. The most significant is from Nationstar Mortgage LLC, currently doing business as “Mr. Cooper.” Nationstar was the purchaser of FHN’s mortgage servicing obligations and assets in 2013 and 2014 and, was FHN’s subservicer. Nationstar asserts several categories of indemnity obligations in connection with mortgage loans under the subservicing arrangement and under the purchase transaction. This matter currently is not in litigation, but litigation in the future is possible. FHN is unable to

estimate an RPL range for this matter due to significant uncertainties regarding: the exact nature of each of Nationstar’s claims and its position in respect of each; the number of, and the facts underlying, the claimed instances of indemnifiable events; the applicability of FHN’s contractual indemnity covenants to those facts and events; and, in those cases where the facts and events might support an indemnity claim, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.

FHN has additional potential exposures related to its pre-2009 mortgage businesses. A few of those matters have become litigation which FHN currently estimates are immaterial, some are non-litigation claims or threats, some are mere subpoenas or other requests for information, and in some areas FHN has no indication of any active or threatened dispute. Some of those matters might eventually result in settlements, and some might eventually result in adverse litigation outcomes, but none are included in

the material loss contingency liabilities mentioned above or in the RPL range mentioned ~~above..~~above.

Mortgage Loan Repurchase and Foreclosure Liability

FHN’s repurchase and foreclosure liability, primarily related to its pre-2009 mortgage businesses, is comprised of accruals to cover estimated loss content in the active pipeline (consisting of mortgage loan repurchase, make-whole, foreclosure/servicing demands and certain related exposures), estimated future inflows, and estimated loss content related to certain known claims not currently included in the active pipeline. FHN compares the estimated probable incurred losses determined under the applicable loss estimation approaches for the respective periods with current reserve levels. Changes in the estimated required liability levels are recorded as necessary through the repurchase and foreclosure provision.

Based on currently available information and experience to date, FHN has evaluated its loan repurchase, make-whole, foreclosure, and certain related exposures and has accrued for losses of $16 million as of ~~March 31,~~both September 30, 2021 and December 31, 2020. Accrued liabilities for FHN’s estimate of these obligations are reflected in ~~Other~~other liabilities on the Consolidated Balance Sheets. Charges/expense reversals to increase/decrease the liability are included within ~~Other~~other income on the Consolidated Statements of Income. The estimates are based upon currently available information and fact patterns that exist as of each balance sheet date and could be subject to future changes. Changes to any one of

FHN sponsors a noncontributory, qualified defined benefit pension plan to employees hired or re-hired on or before September 1, 2007. Pension benefits are based on years of service, average compensation near retirement or other termination, and estimated social security benefits at age 65. Benefits under the plan are “frozen” so that years of service and compensation changes after 2012 do not affect the benefit owed. Minimum contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. Decisions to contribute to the plan are based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. FHN made no contributions to the qualified pension plan in 2020. ~~Management does~~FHN has not ~~currently anticipate that FHN will make~~made a contribution to the qualified pension plan ~~for~~in 2021. Management anticipates that FHN will make an immaterial contribution to the ~~remainder of 2021.~~qualified pension plan during the next twelve months.

FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain employees whose benefits under the qualified pension plan have been limited by tax rules. These other non-qualified plans are unfunded, and contributions to these plans cover all benefits paid under the non-qualified plans. Payments made under the non-qualified plans were $5 million for 2020. FHN anticipates making benefit payments under the non-qualified plans of $5 million in 2021.

Service cost is included in ~~Personnel~~personnel expense in the Consolidated Statements of Income. All other components of net periodic benefit cost are included in ~~Other~~other expense.

For more information on FHN's pension plan and other postretirement benefit plans, see Note 18 - Pension, Savings and Other Employee Benefits in FHN's 2020 Annual Report on Form 10-K.

~~During the fourth quarter of 2020, FHN reorganized its internal management structure and, accordingly, its segment reporting structure. Historically,~~ FHN's ~~reportable business~~operating segments were Regional Banking, Fixed Income, Corporate, and Non-strategic. On July 1, 2020, FHN and IBKC closed their merger of equals transaction. This transaction prompted organizational changes to better integrate and execute the combined Company's strategic priorities across all lines of businesses. As a result, FHN revised its reportable segments as described below. Prior period segment information has been reclassified to conform to the current period presentation.

~~FHN is~~are composed of the ~~following operating segments:~~following:

•Regional Banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial clients primarily in the southern U.S. and other selected markets. Regional Banking also provides investment, wealth management, financial planning, trust and asset management services for consumer clients.

•Specialty Banking segment consists of lines of business that deliver product offerings and services with specialized industry knowledge. Specialty Banking’s lines of business include asset-based lending, mortgage warehouse lending, commercial real estate, franchise finance, correspondent banking, equipment finance, mortgage, and title insurance. In addition to traditional lending and deposit taking, Specialty Banking also delivers treasury management solutions, loan syndications, and international ~~banking and SBA lending.~~banking. Additionally, Specialty Banking has

a line of business focused on fixed income securities sales, trading, underwriting, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory services, and derivative sales.

•Corporate segment consists primarily of corporate support functions including risk management, audit, accounting, finance, executive office, and corporate communications. Shared support services such as human resources, properties, technology, credit risk and bank operations are allocated to the activities of Regional Banking, Specialty Banking and Corporate. Additionally, the Corporate segment includes centralized management of capital and funding to support the business activities of the company including management of wholesale funding, liquidity, and capital management and allocation. The Corporate segment also includes the revenue and expense associated with run-off businesses such as pre-2009 mortgage banking elements, run-off consumer and trust preferred loan portfolios, and other exited businesses.

Periodically, FHN adapts its segments to reflect managerial or strategic changes. During 2020, FHN reorganized its internal management structure and, accordingly, its segment reporting structure. Historically, FHN's reportable business segments were Regional Banking, Fixed Income, Corporate,

and Non-strategic. The closing of the FHN and IBKC merger-of-equals transaction prompted organizational changes to better integrate and execute the combined Company's strategic priorities across all lines of businesses. As a result, segment information for 2020 has been reclassified to conform to the current period presentation.

FHN may also modify its methodology of allocating expenses and equity among segments which could change historical segment results. Business segment revenue, expense, asset, and equity levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on internally developed assignments and allocations, to an extent they are subjective. Generally, all assignments and allocations have been consistently applied for all periods presented.

FHN makes equity investments in various entities that are considered VIEs, as defined by GAAP. A VIE typically does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. The Company’s variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the fair value of the entity's net assets. FHN consolidates a VIE if FHN is the primary beneficiary of the entity. FHN is the primary beneficiary of a VIE if FHN's variable interest provides it with the power to direct the activities that most significantly impact the VIE and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to the VIE. To determine whether or not a variable interest held could potentially be significant to the VIE, FHN considers both qualitative and quantitative factors regarding the nature, size and form of its involvement with the VIE. FHN assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis.

Consolidated Variable Interest Entities

FHN has established certain rabbi trusts related to deferred compensation plans offered to its employees. FHN contributes employee cash compensation deferrals to the trusts and directs the underlying investments made by the trusts. The assets of these trusts are available to FHN’s creditors only in the event that FHN becomes insolvent. These trusts are considered VIEs as there is no equity at risk in the trusts since FHN provided the equity interest to its employees in exchange for services rendered. FHN is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities that most significantly impact the economic performance of the rabbi trusts through its ability to direct the underlying investments made by the trusts. Additionally, FHN could potentially receive benefits or absorb losses that are significant to the trusts due to its right to receive any asset values in excess of liability payoffs and its obligation to fund any liabilities to employees that are in excess of a rabbi trust’s assets.

Low Income Housing Tax Credit Partnerships. Through designated wholly-owned subsidiaries, First Horizon Bank makes equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the LIHTC. The purpose of these investments is to achieve a satisfactory return on capital and to support FHN’s community reinvestment initiatives. LIHTC partnerships are managed by unrelated general partners that have the power to direct the activities which most significantly affect the performance of the partnerships. FHN is therefore not the primary beneficiary of any LIHTC partnerships. Accordingly, FHN does not consolidate these VIEs and accounts for these investments in other assets on the Consolidated Balance Sheets.

FHN accounts for all qualifying LIHTC investments under the proportional amortization method. Under this method an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense. LIHTC investments that do not qualify for the proportional amortization method are accounted for using the equity method. Expenses associated with ~~these~~non-qualifying LIHTC investments were not material for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

Other Tax Credit Investments. Through designated subsidiaries, First Horizon Bank periodically makes equity investments as a non-managing member in various LLCs that sponsor community development projects utilizing the NMTC. First Horizon Bank also makes equity investments as a limited partner or non-managing member in entities that receive ~~tax credits from~~ solar and historic tax credits. The ~~purpose~~purposes of these investments isare to achieve a satisfactory return on capital and to support FHN’s community reinvestment initiatives. These entities are considered VIEs as First Horizon Bank's subsidiaries represent the holders of the equity investment at risk, but do not have the ability to direct the activities that most significantly affect the performance of the entities.

Small Issuer Trust Preferred Holdings. First Horizon Bank holds variable interests in trusts which have issued mandatorily redeemable preferred capital securities (“trust preferreds”) for smaller banking and insurance enterprises. First Horizon Bank has no voting rights for the trusts’ activities. The trusts’ only assets are junior subordinated debentures of the issuing enterprises. The creditors of the trusts hold no recourse to the assets of First Horizon Bank. Since First Horizon Bank is solely a holder of the trusts’ securities, it has no rights which would give it the power to direct the activities that most significantly impact the trusts’ economic performance and thus it is not considered the primary beneficiary of the trusts. First Horizon Bank has no contractual requirements to provide financial support to the trusts.

On-Balance Sheet Trust Preferred Securitization. In 2007, First Horizon Bank executed a securitization of certain small issuer trust preferreds for which the underlying trust meets the definition of a VIE as the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entity’s economic performance. Since First Horizon Bank did not retain servicing or other ~~decision making~~decision-making rights, First Horizon Bank is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the trust’s

economic performance. Accordingly, First Horizon Bank has accounted for the funds received through the securitization as a term borrowing in its Consolidated Balance Sheets. First Horizon Bank has no contractual requirements to provide financial support to the trust.

Holdings in Agency Mortgage-Backed Securities. FHN holds securities issued by various Agency securitization trusts. Based on their restrictive nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities’ economic performance. FHN could potentially receive benefits or absorb losses that are significant to the trusts based on the nature of the trusts’ activities and the size of FHN’s holdings. However, FHN is solely a holder of the trusts’ securities and does not have the power to direct the activities that most significantly impact the trusts’ economic performance and is not considered the primary beneficiary of the trusts. FHN has no contractual requirements to provide financial support to the trusts.

Commercial Loan Troubled Debt Restructurings. For certain troubled commercial loans, First Horizon Bank restructures the terms of the borrower’s debt in an effort to increase the probability of receipt of amounts contractually due. Following a troubled debt restructuring, the borrower entity typically meets the definition of a VIE as the initial determination of whether an entity is a VIE must be reconsidered as events have proven that the entity’s equity is not sufficient to permit it to finance its activities without additional subordinated financial support or a restructuring of the terms of its financing. As First Horizon Bank does not have the power to direct the activities that most significantly impact such troubled commercial borrowers’ operations, it is not considered the primary beneficiary even in situations where, based on the size of the financing provided, First Horizon Bank is exposed to potentially significant benefits and losses of the borrowing entity. First Horizon Bank has no contractual requirements to

provide financial support to the borrowing entities beyond certain funding commitments established upon restructuring of the terms of the debt that allows for preparation of the underlying collateral for sale.

Proprietary Trust Preferred Issuances. In conjunction with its acquisitions, FHN acquired junior subordinated debt underlying multiple issuances of trust preferred debt. All of the trusts are considered VIEs because the ownership interests from the capital

contributions to these trusts are not considered “at risk” in evaluating whether the holders of the equity investments at risk in the trusts have the ability to direct the activities that most significantly impact the entities’ economic performance. Thus, FHN cannot be the trusts’ primary beneficiary because its ownership interests in the trusts are not considered variable interests as they are not considered “at risk”. Consequently, none of the trusts are consolidated by FHN.

In the normal course of business, FHN utilizes various financial instruments (including derivative contracts and credit-related agreements) through its fixed income and risk management operations, as part of its risk management strategy and as a means to meet clients’ needs. Derivative instruments are subject to credit and market risks in excess of the amount recorded on the balance sheet as required by GAAP. The contractual or notional amounts of these financial instruments do not necessarily represent the amount of credit or market risk. However, they can be used to measure the extent of involvement in various types of financial instruments. Controls and monitoring procedures for these instruments have been established and are routinely reevaluated. The ALCO controls, coordinates, and monitors the usage and effectiveness of these financial instruments.

Credit risk represents the potential loss that may occur if a party to a transaction fails to perform according to the terms of the contract. The measure of credit exposure is the replacement cost of contracts with a positive fair value. FHN manages credit risk by entering into financial instrument transactions through national exchanges, primary dealers or approved counterparties, and by using mutual margining and master netting agreements whenever possible to limit potential exposure. FHN also maintains collateral posting requirements with certain counterparties to limit credit risk. Daily margin posted or received with central clearinghouses is considered a legal settlement of the related derivative contracts which results in a net presentation for each contract in the Consolidated Balance Sheets. Treatment of daily margin as a settlement has no effect on hedge accounting or gains/losses for the applicable derivative contracts. On ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, FHN had ~~$234~~$180 million and $280 million of cash receivables and ~~$122~~$111 million and $166 million of cash payables related to collateral posting under master netting arrangements, inclusive of collateral posted related to contracts with adjustable collateral posting thresholds and over-collateralized positions, with derivative counterparties. With exchange-traded contracts, the credit risk is limited to the clearinghouse used. For non-exchange traded instruments, credit risk may occur when there is a gain in the fair value of the financial instrument and the counterparty fails to perform according to the terms of the contract and/or when the collateral proves to be of insufficient value. See additional discussion regarding master netting agreements and collateral posting requirements later in this note under the heading “Master Netting and Similar Agreements.” Market risk represents the potential loss due to the decrease in the value of a ~~financial instrument caused~~

financial instrument caused primarily by changes in interest rates or the prices of debt instruments. FHN manages market risk by establishing and monitoring limits on the types and degree of risk that may be undertaken. FHN continually measures this risk through the use of models that measure value-at-risk and earnings-at-risk.

Derivative Instruments. FHN enters into various derivative contracts both to facilitate client transactions and as a risk management tool. Where contracts have been created for clients, FHN enters into upstream transactions with dealers to offset its risk exposure. Contracts with dealers that require central clearing are novated to a clearing agent who becomes FHN’s counterparty. Derivatives are also used as a risk management tool to hedge FHN’s exposure to changes in interest rates or other defined market risks.

Forward contracts are over-the-counter contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a specified price, with delivery or settlement at a specified date. Futures contracts are exchange-traded contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a specified price, with delivery or settlement at a specified date. Interest rate option contracts give the purchaser the right, but not the obligation, to buy or sell a specified quantity of a financial instrument, at a specified price, during a specified period of time. Caps and floors are options that are linked to a notional principal amount and an underlying indexed interest rate. Interest rate swaps involve the exchange of interest payments at specified intervals between two parties without the exchange of any underlying principal. Swaptions are options on interest rate swaps that give the purchaser the right, but not the obligation, to enter into an interest rate swap agreement during a specified period of time.

Trading Activities

FHNF trades U.S. Treasury, U.S. Agency, government-guaranteed loan, mortgage-backed, corporate and municipal fixed income securities, and other securities for distribution to clients. When these securities settle on a delayed basis, they are considered forward contracts. FHNF also enters into interest rate contracts, including caps, swaps, and floors, for its clients. In addition, FHNF enters into futures and option contracts to economically hedge interest rate risk associated with a portion of its securities inventory. These transactions are measured at fair value, with changes in fair value

recognized in noninterest income. Related assets and liabilities are recorded on the Consolidated Balance Sheets as derivative assets and derivative liabilities within ~~Other~~other assets and ~~Other~~other liabilities. The FHNF Risk Committee and the Credit Risk Management Committee collaborate to mitigate credit risk related to these transactions. Credit risk is controlled through credit approvals, risk control limits, and ongoing

monitoring procedures. Total trading revenues were ~~$115~~

$85 million and ~~$78~~$99 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, and $291 million and $278 million for the nine months ended September 30, 2021 and 2020, respectively. Trading revenues are inclusive of both derivative and non-derivative financial instruments and are included in ~~Fixed~~fixed income on the Consolidated Statements of Income.

Interest Rate Risk Management

FHN’s ALCO focuses on managing market risk by controlling and limiting earnings volatility attributable to changes in interest rates. Interest rate risk exists to the extent that interest-earning assets and interest-bearing liabilities have different maturity or repricing characteristics. FHN uses derivatives, primarily swaps, that are designed to moderate the impact on earnings as interest rates change. Interest paid or received for swaps utilized by FHN to hedge the fair value of long term debt is recognized as an adjustment of the interest expense of the liabilities whose risk is being managed. FHN’s interest rate risk management policy is to use derivatives to hedge interest rate risk or market value of assets or liabilities, not to speculate. In addition, FHN has entered into certain interest rate swaps and caps as a

part of a product offering to commercial clients that includes customer derivatives paired with upstream offsetting market instruments that, when completed, are designed to mitigate interest rate risk. These contracts do not qualify for hedge accounting and are measured at fair value with gains or losses included in current earnings in ~~Noninterest~~noninterest expense on the Consolidated Statements of Income.

FHN had designated a derivative transaction in a hedging strategy to manage interest rate risk on $500 million of senior debt prior to its maturity in December 2020. This transaction qualified for hedge accounting using the long-haul method. FHN early redeemed the $500 million senior debt in November 2020.


FIRST HORIZON CORPORATION			4347			~~1Q21~~3Q21 FORM 10-Q REPORT

Table of Contents

Note 15 – Derivatives (Continued)

The following tables summarize FHN’s derivatives associated with interest rate risk management activities as of ~~March 31,~~September 30, 2021 and December 31, 2020:


		March 31, 2021							September 30, 2021
(Dollars in millions)	(Dollars in millions)	Notional		Assets		Liabilities		(Dollars in millions)	Notional		Assets		Liabilities
Customer Interest Rate Contracts Hedging	Customer Interest Rate Contracts Hedging							Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:	Hedging Instruments and Hedged Items:							Hedging Instruments and Hedged Items:
Customer interest rate contracts	Customer interest rate contracts	$	7,057	$	255	$	30	Customer interest rate contracts	$	7,745	$	260	$	16
Offsetting upstream interest rate contracts	Offsetting upstream interest rate contracts	7,057		4		24		Offsetting upstream interest rate contracts	7,685		3		26


	December 31, 2020
(Dollars in millions)	Notional		Assets		Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts	$	6,868	$	436	$	1
Offsetting upstream interest rate contracts	6,868		5		35

The following table summarizes gains (losses) on FHN’s derivatives associated with interest rate risk management activities for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020				2021		2020		2021		2020
(Dollars in millions)	(Dollars in millions)	Gains (Losses)		Gains (Losses)			(Dollars in millions)	Gains (Losses)		Gains (Losses)		Gains (Losses)		Gains (Losses)
Customer Interest Rate Contracts Hedging	Customer Interest Rate Contracts Hedging						Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:	Hedging Instruments and Hedged Items:						Hedging Instruments and Hedged Items:
Customer interest rate contracts (a)	Customer interest rate contracts (a)	$	214	$	196		Customer interest rate contracts (a)	$	(29)	$	(14)	$	(197)	$	197
Offsetting upstream interest rate contracts (a)	Offsetting upstream interest rate contracts (a)	(214)		(196)			Offsetting upstream interest rate contracts (a)	29		14		$	197	$	(197)
Debt Hedging	Debt Hedging						Debt Hedging
Hedging Instruments:	Hedging Instruments:						Hedging Instruments:
Interest rate swaps (b)	Interest rate swaps (b)	$	0	$	5		Interest rate swaps (b)	$	—	$	(1)	$	—	$	3
Hedged Items:	Hedged Items:						Hedged Items:
Term borrowings (a) (c)	Term borrowings (a) (c)	0		(4)			Term borrowings (a) (c)	—		1		—		(2)

Cash Flow Hedges

Prior to 2021, FHN had pay floating, receive fixed interest rate swaps designed to manage its exposure to the variability in cash flows related to interest payments on debt instruments, which primarily consisted of held-to-maturity trust preferred loans. In conjunction with the IBKC merger, FHN acquired interest rate contracts (floors and collars) which have been re-designated as cash flow hedges. The debt

instruments primarily consist of held-to-maturity commercial loans that have variable interest payments based on 1-month LIBOR.

In a cash flow hedge, the entire change in the fair value of the interest rate swap included in the assessment of hedge effectiveness is initially

recorded in OCI and is subsequently reclassified from OCI to current period earnings (interest income or interest expense) in the same period that the hedged item affects earnings.

Other Derivatives

As part of the IBKC merger, FHN acquired mortgage banking operations that include the origination and sale of loans into the secondary market. As part of the origination of loans, FHN enters into interest rate lock commitments with borrowers. Additionally, FHN enters into forward sales contracts with buyers for delivery of loans at a future date.

Both of these contracts qualify as freestanding derivatives and are recognized at fair value through earnings. The notional and fair values of these contracts are presented in the table below. Balances and activity for periods prior to the IBKC merger were not significant.

March 31, 2021
(Dollars in millions) Notional Assets Liabilities
Mortgage Banking Hedges
Option contracts written $ 702 $ 9 $ 1
Forward contracts purchased 878 14 0


FIRST HORIZON CORPORATION			4549			~~1Q21~~3Q21 FORM 10-Q REPORT

Table of Contents

Note 15 – Derivatives (Continued)


		December 31, 2020							September 30, 2021
(Dollars in millions)	(Dollars in millions)	Notional		Assets		Liabilities		(Dollars in millions)	Notional		Assets		Liabilities
Mortgage Banking Hedges	Mortgage Banking Hedges							Mortgage Banking Hedges

Option contracts written	Option contracts written	$	667	$	20	$	0	Option contracts written	$	419	$	7	$	—
Forward contracts purchased	Forward contracts purchased	725		0		6		Forward contracts purchased	522		3		—


	December 31, 2020
(Dollars in millions)	Notional		Assets		Liabilities
Mortgage Banking Hedges

Option contracts written	$	667	$	20	$	—
Forward contracts purchased	725		—		6

The following table summarizes gains (losses) on FHN's derivatives associated with mortgage banking activities for the three ~~month period~~and nine months ended ~~March 31,~~September 30, 2021.

Three Months Ended
March 31,

~~2021~~

~~(Dollars in millions)~~

~~Gains (Losses)~~

~~Mortgage Banking Hedges~~

~~Option contracts written~~

$

~~(11)~~

~~Forward contracts purchased~~

23


	Three Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,		Nine months ended September 30,
	2021		2020		2021		2020
(Dollars in millions)	Gains (Losses)		Gains (Losses)		Gains (Losses)		Gains (Losses)
Mortgage Banking Hedges

Option contracts written	$	(3)	$	7	$	(12)	$	7
Forward contracts purchased	(2)		(10)		10		(10)

In conjunction with ~~the sale~~pre-2020 sales of ~~its~~ Visa Class B shares, FHN entered into derivative transactions whereby FHN will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the derivative liabilities associated with the sales of Visa Class B shares were ~~$20~~$16 million and $13 million, respectively. See Note 17 - Fair Value of Assets &and Liabilities for discussion of the valuation inputs and processes for these Visa-related derivatives.

FHN utilizes cross currency swaps and cross currency interest rate swaps to economically hedge its exposure to foreign currency risk and interest rate risk associated with non-U.S. dollar denominated loans. As of ~~March 31,~~September 30, 2021 and December 31, 2020, these loans were valued at $10 million and $12 million, respectively. The balance sheet amount and the gains/losses associated with these derivatives were not significant.

Related to its loan participation/syndication activities, FHN enters into risk participation agreements under which it assumes exposure for, or receives indemnification for, borrowers’ performance on underlying interest rate derivative contracts. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the notional values of FHN’s risk participations were ~~$237~~$234 million and $233 million of derivative assets and ~~$501~~

$512 million and $464 million of derivative liabilities, respectively. Assuming all underlying third party customers referenced in the swap contracts defaulted at ~~March 31,~~September 30, 2021 and December 31, 2020, the exposure from these agreements would not be material based on the fair value of the underlying swaps.

In conjunction with the IBKC merger, FHN obtained certain certificates of deposit with the rate of return based on an equity index which is considered an embedded derivative as a written option that must be separately recognized. The risks of the written option are offset by purchasing an option with terms that mirror the written option, which is also carried at fair value on the Company’s Consolidated Balance Sheets. As of ~~March 31,~~September 30, 2021 and December 31, 2020, FHN had recognized ~~$2 million and~~ $1 million ~~respectively,~~ of both assets and liabilities associated with these contracts.

Master Netting and Similar Agreements

FHN uses master netting agreements, mutual margining agreements and collateral posting requirements to minimize credit risk on derivative contracts. Master netting and similar agreements are used when counterparties have multiple derivatives contracts that allow for a “right of setoff,” meaning that a counterparty may net offsetting positions and collateral with the same counterparty under the contract to determine a net receivable or payable.


FIRST HORIZON CORPORATION			50			3Q21 FORM 10-Q REPORT

Table of Contents

Note 15 – Derivatives (Continued)

The following discussion provides an overview of these arrangements which may vary due to the derivative type and market in which a derivative transaction is executed.

Interest rate derivatives are subject to agreements consistent with standard agreement forms of the ISDA. Currently, all interest rate derivative contracts are entered into as over-the-counter transactions and collateral posting requirements are based on the net asset or liability position with each respective counterparty. For contracts that require central clearing, novation to a counterparty with access to a clearinghouse occurs and initial margin is posted.


~~FIRST HORIZON CORPORATION~~			46			~~1Q21 FORM 10-Q REPORT~~

~~Table of Contents~~

~~Note 15 – Derivatives (Continued)~~

Cash margin received (posted) that is considered settlements for the derivative contracts is included in the respective derivative asset (liability) value. Cash margin that is considered collateral received (posted) for interest rate derivatives is recognized as a liability (asset) on FHN’s Consolidated Balance Sheets.

Interest rate derivatives with clients that are smaller financial institutions typically require posting of collateral by the counterparty to FHN. This collateral is subject to a threshold with daily adjustments based upon changes in the level or fair value of the derivative position. Positions and related collateral can be netted in the event of default. Collateral pledged by a counterparty is typically cash or securities. The securities pledged as collateral are not recognized within FHN’s Consolidated Balance Sheets. Interest rate derivatives associated with lending arrangements share the collateral with the related loan(s). The derivative and loan positions may be netted in the event of default. For disclosure purposes, the entire collateral amount is allocated to the loan.

Interest rate derivatives with larger financial institutions entered into prior to required central clearing typically contain provisions whereby the collateral posting thresholds under the agreements adjust based on the credit ratings of both counterparties. If the credit rating of FHN and/or First Horizon Bank is lowered, FHN could be required to post additional collateral with the counterparties. Conversely, if the credit rating of FHN and/or First Horizon Bank is increased, FHN could have collateral released and be required to post less collateral in the future. Also, if a counterparty’s credit ratings were to decrease, FHN and/or First Horizon Bank could require the posting of additional collateral; whereas if a counterparty’s credit ratings were to increase, the counterparty could require the release of excess collateral. Collateral for these arrangements is adjusted daily based on changes in the net fair value position with each counterparty.

The net fair value, determined by individual counterparty, of all derivative instruments with adjustable collateral posting thresholds was ~~$85~~$93 million of assets and ~~$33~~$17 million of liabilities on ~~March 31,~~September 30, 2021, and $200 million of assets and $5

million of liabilities on December 31, 2020. As of ~~March 31,~~September 30, 2021 and December 31, 2020, FHN had received collateral of ~~$248~~$221 million and $320 million and posted collateral of $5$3 million and $34 million, respectively, in the normal course of business related to these agreements.

Certain agreements entered into prior to required central clearing also contain accelerated termination provisions, inclusive of the right of offset, if a counterparty’s credit rating falls below a specified level. If a counterparty’s debt rating (including FHN’s and First Horizon Bank’s) were to fall below these minimums, these provisions would be triggered, and the counterparties could terminate the agreements and require immediate settlement of all derivative contracts under the agreements. The net fair value, determined by individual counterparty, of all interest rate derivative instruments with credit-risk-related contingent accelerated termination provisions was ~~$102~~$103 million of assets and ~~$40~~$20 million of liabilities on ~~March 31,~~September 30, 2021, and $216 million of assets and $17 million of liabilities on December 31, 2020. As of ~~March 31,~~September 30, 2021 and December 31, 2020, FHN had received collateral of ~~$265~~$232 million and $343 million and posted collateral of ~~$10~~$6 million and $53 million, respectively, in the normal course of business related to these contracts.

FHNF buys and sells various types of securities for its clients. When these securities settle on a delayed basis, they are considered forward contracts, and are generally not subject to master netting agreements. For futures and options, FHN transacts through a third party, and the transactions are subject to margin and collateral maintenance requirements. In the event of default, open positions can be offset along with the associated collateral.

For this disclosure, FHN considers the impact of master netting and other similar agreements which allow FHN to settle all contracts with a single counterparty on a net basis and to offset the net derivative asset or liability position with the related securities and cash collateral. The application of the collateral cannot reduce the net derivative asset or liability position below zero, and therefore any excess collateral is not reflected in the following tables.


FIRST HORIZON CORPORATION			4751			~~1Q21~~3Q21 FORM 10-Q REPORT

Table of Contents

Note 15 – Derivatives (Continued)

The following table provides details of derivative assets and collateral received as presented on the Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020:


								Gross amounts not offset in the Balance Sheets													Gross amounts not offset in the Balance Sheets
(Dollars in millions)	(Dollars in millions)	Gross amounts of recognized assets		Gross amounts offset in the Balance Sheets		Net amounts of assets presented in the Balance Sheets (a)		Derivative liabilities available for offset		Collateral received		Net amount		(Dollars in millions)	Gross amounts of recognized assets		Gross amounts offset in the Balance Sheets		Net amounts of assets presented in the Balance Sheets (a)		Derivative liabilities available for offset		Collateral received		Net amount
Derivative assets:	Derivative assets:													Derivative assets:
March 31, 2021
September 30, 2021														September 30, 2021
Interest rate derivative contracts	Interest rate derivative contracts	$	412	$	0	$	412	$	(42)	$	(232)	$	138	Interest rate derivative contracts	$	408	$	—	$	408	$	(31)	$	(217)	$	160
Forward contracts	Forward contracts	131		0		131		(33)		(5)		93		Forward contracts	43		—		43		(20)		(4)		19
		$	543	$	0	$	543	$	(75)	$	(237)	$	231		$	451	$	—	$	451	$	(51)	$	(221)	$	179

December 31, 2020	December 31, 2020													December 31, 2020
Interest rate derivative contracts	Interest rate derivative contracts	$	702	$	0	$	702	$	(7)	$	(327)	$	368	Interest rate derivative contracts	$	702	$	—	$	702	$	(7)	$	(327)	$	368
Forward contracts	Forward contracts	63		0		63		(14)		(20)		29		Forward contracts	63		—		63		(14)		(20)		29
		$	765	$	0	$	765	$	(21)	$	(347)	$	397		$	765	$	—	$	765	$	(21)	$	(347)	$	397

(a)Included in ~~Other~~other assets on the Consolidated Balance Sheets. As of ~~March 31,~~September 30, 2021 and December 31, 2020, ~~$16 million and~~ $4 million ~~respectively,~~ of derivative assets have been excluded from these tables because they are generally not subject to master netting or similar agreements.

The following table provides details of derivative liabilities and collateral pledged as presented on the Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020:


								Gross amounts not offset in the Balance Sheets													Gross amounts not offset in the Balance Sheets
(Dollars in millions)	(Dollars in millions)	Gross amounts of recognized liabilities		Gross amounts offset in the Balance Sheets		Net amounts of liabilities presented in the Balance Sheets (a)		Derivative assets available for offset		Collateral pledged		Net amount		(Dollars in millions)	Gross amounts of recognized liabilities		Gross amounts offset in the Balance Sheets		Net amounts of liabilities presented in the Balance Sheets (a)		Derivative assets available for offset		Collateral pledged		Net amount
Derivative liabilities:	Derivative liabilities:													Derivative liabilities:
March 31, 2021
September 30, 2021														September 30, 2021
Interest rate derivative contracts	Interest rate derivative contracts	$	128	$	0	$	128	$	(42)	$	(12)	$	74	Interest rate derivative contracts	$	95	$	—	$	95	$	(31)	$	(9)	$	55
Forward contracts	Forward contracts	115		0		115		(33)		(34)		48		Forward contracts	35		—		35		(20)		(12)		3
		$	243	$	0	$	243	$	(75)	$	(46)	$	122		$	130	$	—	$	130	$	(51)	$	(21)	$	58
December 31, 2020	December 31, 2020													December 31, 2020
Interest rate derivative contracts	Interest rate derivative contracts	$	60	$	0	$	60	$	(7)	$	(31)	$	22	Interest rate derivative contracts	$	60	$	—	$	60	$	(7)	$	(31)	$	22
Forward contracts	Forward contracts	65		0		65		(14)		(51)		0		Forward contracts	65		—		65		(14)		(51)		—
		$	125	$	0	$	125	$	(21)	$	(82)	$	22		$	125	$	—	$	125	$	(21)	$	(82)	$	22

For repurchase, reverse repurchase and securities borrowing transactions, FHN and each counterparty have the ability to offset all open positions and related collateral in the event of default. Due to the nature of these transactions, the value of the collateral for each transaction approximates the value of the corresponding receivable or payable. For repurchase agreements through FHN’s fixed income business (securities purchased under agreements to resell and securities sold under agreements to repurchase), transactions are collateralized by securities and/or government guaranteed loans which are delivered on the settlement date and are maintained throughout the term of the transaction. For FHN’s repurchase agreements through banking activities (securities sold under agreements to repurchase), securities are typically pledged at settlement and not released until maturity. For asset positions, the collateral is not included on FHN’s Consolidated Balance Sheets. For

liability positions, securities collateral pledged by FHN is generally represented within FHN’s trading or available-for-sale securities portfolios.

For this disclosure, FHN considers the impact of master netting and other similar agreements that allow FHN to settle all contracts with a single counterparty on a net basis and to offset the net asset or liability position with the related securities collateral. The application of the collateral cannot reduce the net asset or liability position below zero, and therefore any excess collateral is not reflected in the tables below.

Securities purchased under agreements to resell is included in ~~Federal~~federal funds sold and securities purchased under agreements to resell in the Consolidated Balance Sheets. Securities sold under agreements to repurchase is included in ~~Short-term~~short-term borrowings.

FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:

•Level 1—Valuation is based upon quoted prices for identical instruments traded in active markets.

•Level 2—Valuation is based upon quoted prices for similar instruments in active

markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3—Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques.

For the three and nine months ended ~~March 31,~~September 30, 2021, FHN recognized less than $1 million of fixed asset recoveries and $33 million of fixed asset impairments, respectively, and less than $1 million of leased asset recoveries and $3 million of leased asset impairments, ~~for lease assets~~respectively, primarily related to continuing acquisition integration efforts associated with reduction of leased office space and ~~branch~~banking center optimization. These amounts were primarily recognized in the Corporate segment.

For the three and nine months ended ~~March 31,~~September 30, 2020, FHN recognized ~~an insignificant amount~~$5 million and $6 million of ~~impairment.~~fixed asset impairments, respectively, and $4 million of leased asset impairments for both periods. These amounts were primarily recognized in the Corporate segment.

Lease asset impairments recognized represent the reduction in value of the right-of-use assets associated with leases that are being exited in advance of the contractual lease expiration.

Impairments are measured using a discounted cash flow methodology, which is considered a Level 3 valuation.

Impairments of long-lived tangible assets reflect locations where the associated land and building are either owned or leased. The fair values of owned sites were determined using estimated sales prices from appraisals and broker opinions less estimated costs to sell with adjustments upon final disposition. The fair values of owned assets in leased sites (e.g., leasehold improvements) were determined using a discounted cash flow approach, based on the revised estimated useful lives of the related assets. Both measurement methodologies are considered Level 3 valuations. Impairment adjustments recognized upon disposition of a location are considered Level 2 valuations.

Securities AFS. Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of SBA ~~interest only~~interest-only strips. Management additionally considers whether the loans underlying related ~~SBA-interest only~~SBA interest-only strips are delinquent, in default or prepaying, and adjusts the fair value down 20 - 100% depending on the length of time in default.

Loans held for sale. Foreclosure losses and prepayment rates are significant unobservable inputs used in the fair value measurement of FHN’s residential real estate loans held for sale. Loss severity trends are also assessed to evaluate the reasonableness of fair value estimates resulting from discounted cash flows methodologies as well as to estimate fair value for newly repurchased loans and loans that are near foreclosure. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. All observable and unobservable inputs are re-assessed quarterly.

Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of unguaranteed interests in SBA loans. Unguaranteed interest in SBA loans held for sale are carried at less than the outstanding balance due to credit risk estimates. Credit risk adjustments may be reduced if prepayment is likely or as consistent payment history is realized. Management also considers other factors such as delinquency or default and adjusts the fair value accordingly.

Loans held for investment. Constant prepayment rate, constant default rate and loss severity trends are significant unobservable inputs used in the fair value measurement of loans held for investment. Increases (decreases) in each of these inputs in isolation result in negative (positive) effects on the valuation of the associated loans.

Derivative liabilities. In conjunction with ~~the~~pre-2020 sales of ~~its~~ Visa Class B shares, FHN and the purchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. FHN uses a discounted cash flow methodology in order to estimate the fair value of FHN’s derivative liabilities associated with its prior sales of Visa Class B shares. The methodology includes estimation of both the resolution amount for Visa’s Covered Litigation matters as well as the length of time until the resolution occurs. Significant increases (decreases) in either of these inputs in isolation would result in significantly higher (lower) fair value measurements

for the derivative liabilities.

Additionally, FHN performs a probability weighted multiple resolution scenario to calculate the estimated fair value of these derivative liabilities. Assignment of higher (lower) probabilities to the larger potential resolution scenarios would result in an increase (decrease) in the estimated fair value of the derivative liabilities. Since this estimation process requires application of judgment in developing significant unobservable inputs used to determine the possible outcomes and the probability weighting assigned to each scenario, these derivatives have been classified within Level 3 in fair value measurements disclosures.

Loans and leases and Other Real Estate Owned. Collateral-dependent loans and OREO are primarily valued using appraisals based on sales of comparable properties in the same or similar markets. Other collateral (receivables, inventory, equipment, etc.) is valued through borrowing base certificates, financial statements and/or auction valuations. These valuations are discounted based on the quality of reporting, knowledge of the marketability/collectability of the collateral and historical disposition rates.

Other assets – tax credit investments. The estimated fair value of tax credit investments accounted for under the equity method is generally determined in relation to the yield (i.e., future tax credits to be received) an acquirer of these investments would expect in relation to the yields experienced on current new issue and/or secondary market transactions. Thus, as tax credits are recognized, the future yield to a market participant is reduced, resulting in consistent impairment of the individual investments. Individual investments are reviewed for impairment quarterly, which may include the consideration of additional marketability discounts related to specific investments which typically includes consideration of the underlying property’s appraised value.

Fair Value Option

FHN has elected the fair value option on a prospective basis for substantially all types of mortgage loans originated for sale purposes except for mortgage origination operations which utilize the platform acquired from ~~CBF.~~CBF in 2017. FHN determined that the election reduces certain timing differences and better matches changes in the value of such loans with changes in the value of derivatives and forward delivery commitments used as economic hedges for these assets at the time of election.

Repurchased loans relating to mortgage banking operations conducted prior to the IBKC merger are recognized within loans held for sale at fair value at

the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value in periods subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election, these loans would be subject to valuation at the LOCOM value, which would prevent subsequent

values from exceeding the initial fair value,

determined at the time of repurchase, but would require recognition of subsequent declines in value. Thus, the fair value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting the requirement to recognize subsequent declines in value.

FHN also ~~has~~had a portion of mortgage loans held for investment for which the fair value option was elected upon origination and which ~~continue to be~~were accounted for at fair value. This portion of mortgage loans held for investment at fair value option was transferred to the loans held for sale portfolio on April 1, 2021.

For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, the amount for residential real estate loans held for sale included an insignificant amount of gains in pretax earnings that is attributable to changes in instrument-specific credit risk. The portion of the fair value adjustments related to credit risk was determined based on estimated default rates and estimated loss severities. Interest income on residential real estate loans held for sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated Statements of Income as interest on loans held for sale.

FHN has elected to account for retained interest-only strips from guaranteed SBA loans recorded in available-for-sale securities at fair value through earnings. Since these securities are subject to the risk that prepayments may result in FHN not recovering all or a portion of its recorded investment, the fair value election results in a more timely recognition of the effects of estimated prepayments through earnings rather than being recognized through other comprehensive income with periodic review for other-than-temporary impairment. Gains or losses are recognized through fixed income revenues and are presented in the recurring measurements table.

Determination of Fair Value

Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of financial instruments recorded at fair value in the Consolidated Balance Sheets and for estimating the fair value of financial instruments for which fair value is disclosed.

Short-term financial assets. Federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with other financial institutions and the Federal Reserve are carried at historical cost. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

Trading securities and trading liabilities. Trading securities and trading liabilities are recognized at fair value through current earnings. Trading inventory held for broker-dealer operations is included in trading securities and trading liabilities. Broker-dealer long positions are valued at bid price in the bid-ask spread. Short positions are valued at the ask price. Inventory positions are valued using observable inputs including current market transactions,

benchmark yields, credit spreads, and consensus prepayment speeds. Trading loans are valued using observable inputs including current market transactions, swap rates, mortgage rates, and consensus prepayment speeds.

Securities available for ~~sale.~~sale and held to maturity. Valuations of available-for-sale securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include benchmark yields, consensus prepayment speeds, and credit spreads. Trades from similar securities and broker quotes are used to support these valuations.

~~Interest only~~Interest-only strips are valued at elected fair value based on an income approach using an internal valuation model. The internal valuation model includes assumptions regarding projections of future cash flows, prepayment rates, default rates and ~~interest only~~interest-only strip terms. These securities bear the risk of loan prepayment or default that may result in FHN not recovering all or a portion of its recorded investment. When appropriate, valuations are adjusted for various factors including default or prepayment status of the underlying SBA loans. Because of the inherent uncertainty of valuation, those estimated values may be higher or lower than the values that would have been used had a ready market for the securities existed, and may change in the near term.

Loans held for sale. FHN determines the fair value of loans held for sale using either current transaction prices or discounted cash flow models. Fair values are determined using current transaction prices and/or values on similar assets when available, including committed bids for specific loans or loan portfolios. Uncommitted bids may be adjusted based on other available market information.

Fair value of residential real estate loans held for sale determined using a discounted cash flow model incorporates both observable and unobservable inputs. Inputs in the discounted cash flow model include current mortgage rates for similar products, estimated prepayment rates, foreclosure losses, and various loan performance measures (delinquency, LTV, credit score). Adjustments for delinquency and other differences in loan characteristics are typically reflected in the model’s discount rates. Loss severity trends and the value of underlying collateral are also considered in assessing the appropriate fair value for severely delinquent loans and loans in foreclosure. The valuation of HELOCs also incorporates estimated cancellation rates for loans expected to become delinquent.

Non-mortgage consumer loans held for sale are valued using committed bids for specific loans or loan portfolios or current market pricing for similar assets with adjustments for differences in credit standing (delinquency, historical default rates for similar loans), yield, collateral values and prepayment rates. If pricing for similar assets is not available, a discounted cash flow methodology is utilized, which incorporates all of these factors into an estimate of investor required yield for the discount rate.

FHN utilizes quoted market prices of similar instruments or broker and dealer quotations to value the SBA and USDA guaranteed loans. FHN values SBA-unguaranteed interests in loans held for sale based on individual loan characteristics, such as industry type and pay history which generally follows an income approach. Furthermore, these valuations are adjusted for changes in prepayment estimates and are reduced due to restrictions on trading. The fair value of other non-residential real estate loans held for sale is approximated by their carrying values based on current transaction values.

Mortgage loans held for investment at fair value option. The fair value of mortgage loans held for investment at fair value option is determined by a third party using a discounted cash flow model using various assumptions about future loan performance (constant prepayment rate, constant default rate and loss severity trends) and market discount rates.

Loans held for investment. The fair values of mortgage loans held for investment (other than at fair value option) are estimated using an exit price methodology that is based on present values using the interest rate that would be charged for a similar loan to a borrower with similar risk, weighted for varying maturity dates and adjusted for a liquidity discount based on the estimated time period to complete a sale transaction with a market participant.

Other loans and leases held for investment are valued based on present values using the interest rate that would be charged for a similar instrument to a borrower with similar risk, applicable to each category of instruments, and adjusted for a liquidity discount based on the estimated time period to complete a sale transaction with a market participant.

For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are based on current amounts of disposal costs for similar assets. Carrying value is considered to reflect fair value for these loans.

Derivative assets and liabilities. The fair value for forwards and futures contracts is based on current transactions involving identical securities. Futures contracts are exchange-traded and thus have no credit risk factor assigned as the risk of non-performance is limited to the clearinghouse used.

Valuations of other derivatives (primarily interest rate contracts) are based on inputs observed in active markets for similar instruments. ~~Typically~~Typical inputs include benchmark yields, option volatility and option skew. Starting in October 2020, centrally cleared derivatives are discounted using SOFR as required by clearinghouses. In measuring the fair value of these derivative assets and liabilities, FHN has elected to consider credit risk based on the net exposure to individual counterparties. Credit risk is mitigated for these instruments through the use of mutual margining and master netting agreements as well as collateral posting requirements. For derivative contracts with daily cash margin requirements that are considered settlements, the daily margin amount is netted within derivative assets or liabilities. Any remaining credit risk related to interest rate derivatives is considered in determining fair value through evaluation of additional factors such as client loan grades and debt ratings. Foreign currency related derivatives also utilize observable exchange rates in the determination of fair value. The determination of fair value for FHN’s derivative liabilities associated with its prior sales of Visa Class B shares are classified within Level 3 in the fair value measurements disclosure as previously discussed in the unobservable inputs discussion.

The fair value of risk participations is determined in reference to the fair value of the related derivative contract between the borrower and the lead bank in the participation structure, which is determined consistent with the valuation process discussed above. This value is adjusted for the pro rata portion of the reference derivative’s notional value and an assessment of credit risk for the referenced borrower.

OREO. OREO primarily consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Estimated fair value is determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal.

Other assets. For disclosure purposes, other assets consist of tax credit investments, FRB and FHLB Stock, deferred compensation mutual funds and equity investments (including other mutual funds) with readily determinable fair values. Tax credit

investments accounted for under the equity method are written down to estimated fair value quarterly based on the estimated value of the associated tax credits which incorporates estimates of required yield for hypothetical investors. The fair value of all other tax credit investments is estimated using recent transaction information with adjustments for differences in individual investments. Deferred compensation mutual funds are recognized at fair value, which is based on quoted prices in active markets.

Investments in the stock of the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical cost in the Consolidated Balance Sheets which is considered to approximate fair value. Investments in mutual funds are measured at the funds’ reported closing net asset values. Investments in equity securities are valued using quoted market prices when available.

Defined maturity deposits. The fair value of these deposits is estimated by discounting future cash flows to their present value. Future cash flows are discounted by using the current market rates of similar instruments applicable to the remaining maturity. For disclosure purposes, defined maturity deposits include all time deposits.

Short-term financial liabilities. The fair value of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings are approximated by the book value. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

Loan commitments. Fair values of these commitments are based on fees charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Other commitments. Fair values of these commitments are based on fees charged to enter into similar agreements.

The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, reduces the comparability of fair value disclosures between financial institutions. Due to market illiquidity, the fair values for loans and leases, loans held for sale, and term borrowings as of ~~March 31,~~September 30, 2021 and December 31, 2020, involve the use of significant internally-developed pricing

assumptions for certain components of these line items. The assumptions and valuations utilized for this disclosure are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. The valuations of legacy assets, particularly consumer loans and TRUPS loans within the Corporate segment, are influenced by changes in economic conditions since origination and risk perceptions of the financial sector. These considerations affect the estimate of a potential acquirer’s cost of capital and cash flow volatility assumptions from these assets and the resulting fair value measurements may depart significantly from FHN’s internal estimates of the intrinsic value of these assets.

Assets and liabilities that are not financial instruments have not been included in the following ~~table such as~~table. These include the value of long-term relationships with deposit and trust clients, premises and equipment, goodwill and other intangibles, deferred taxes, and certain other assets and other liabilities. Additionally, these measurements are solely for financial instruments as of the measurement date and do not consider the earnings potential of our various business lines. Accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of FHN.

INTRODUCTION

First Horizon Corporation (FHN) is a financial holding company headquartered in Memphis, Tennessee. FHN provides diversified financial services primarily through itits principal subsidiary, First Horizon Bank. First Horizon Bank's principal divisions and subsidiaries operate under the brands of First Horizon Bank, IBERIABANK, First Horizon Advisors, and FHN Financial. FHN offers regional banking, mortgage lending, title insurance, specialized commercial lending, commercial leasing and equipment financing, brokerage, wealth management and capital market services through the First Horizon family of companies. FHN Financial, which operates partly through a division of First Horizon Bank and partly through subsidiaries, is an industry leader in fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad. First Horizon Bank currently has ~~over 490~~approximately 430 banking ~~offices~~centers in 12 states and FHN Financial has 29 offices in 18 states across the U.S. In addition, FHN has 29 title services offices in three states and 15 stand-alone mortgage lending offices in seven states.

This MD&A should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1, as well as other information contained in this document and FHN's 2020 Annual Report on Form 10-K.

Recent Events and Transactions

Merger of Equals

On July 1, 2020, FHN completed its merger of equals with IBERIABANK Corporation. Reported results for

FHN reflect legacy FHN prior to the completion of the merger and results from both FHN and IBKC from the merger closing date forward. As such, comparative income statement data in this MD&A for the first ~~quarter~~six months of 2020 is only for legacy FHN.

~~COVID-19 Pandemic~~

~~Government~~On September 1, 2021, FHN announced that in the wake of widespread devastation caused by Hurricane Ida and ~~societal reaction~~ to prioritize the ~~COVID-19 pandemic caused extraordinary disruption to~~safety and welfare of its associates, clients and communities, it would postpone the ~~U.S. economy, as well as to the local economies within~~

~~FHN's footprint, during the final three quarters of 2020~~IBERIABANK operating system conversion and ~~continuing into the~~rebranding originally planned for October 2021 until first quarter of ~~2021. Business activity, especially lending, declined throughout 2020 and into first quarter this year. In certain business lines,~~2022. As a result, FHN ~~reduced or stopped new lending because~~now expects to achieve its targeted $200 million of ~~the pandemic.~~

Inpre-tax annualized merger cost saves by the fourth quarter of ~~2020, two extremely effective vaccines were approved in~~2022.

Banking Center Optimization

Banking clients’ utilization of digital capabilities to transact and purchase products and services has been on the ~~U.S. Administration~~rise, and the impact of ~~those vaccines began late in 2020, nationwide but on a narrowly targeted basis. In~~ the ~~first quarter of 2021, vaccine production and distribution increased, and a third vaccine was approved in the U.S. Public vaccination in the U.S.~~COVID-19 pandemic has accelerated ~~during~~this trend. In connection with the ~~first four months~~IBKC merger and the related impact of ~~2021. In many~~the pandemic, FHN conducted a comprehensive analysis of FHN's markets, COVID-19 restrictions at least partially were eased by the end of March or during April, and FHN believes further easing is likely in the rest of 2021. COVID-19 restrictions still had a substantial impact on FHNits enterprise-wide digital platforms and its clients in the first quarter of 2021, but FHN expects those impacts to diminish over the rest of this year as the vaccinated percentage of the U.S. population continues to climb. Within the U.S. economy, broadly speaking, manufacturing has largely recovered while services continue to lag significantly, especially in hospitality and leisure.

~~Risk of resurgence remains as new virus variants continue to be identified around the world.~~banking center network. As a result, FHN ~~continues~~determined that it was prudent to ~~closely monitor~~accelerate banking center closures in certain markets, resulting in the pandemic and its effects on clients, especially credit quality, on FHN's communities, and on the financial markets. FHN continues to reach out to clients to discuss challenges and solutions, to provide line draws and new extensions to existing clients, to provide support for small businesses through the Paycheck Protection Program and other stimulus programs, and to provide lending and deposit assistance through deferrals and waived fees.

~~The pandemic has resulted in modest operational disruptions for FHN. Clients' physical access to~~closure of 52 banking centers ~~has been restricted off~~in July 2021 and on10 banking centers in ~~many markets and many non-client-facing associates have worked largely on~~October 2021. As a ~~remote basis. FHN has also implemented~~result of the postponement of the IBERIABANK conversion, 10 additional ~~sick time and child care assistance for~~ ~~associates.~~banking centers that were originally expected to close in fourth quarter 2021 are now expected to close in first quarter 2022.

~~Quarterly Financial Performance Summary~~

~~First~~Third Quarter 2021 ~~versus Fourth Quarter 2020~~Highlights

~~First~~Third quarter 2021 net income available to common shareholders was ~~$225~~ $224 million,, or ~~$0.40~~$0.41 per diluted share, compared to ~~$234~~$295 million, or ~~$0.42~~$0.53 per diluted share, in ~~fourth quarter 2020. First~~second quarter 2021 ~~results produced a return on average assets of 1.12%~~ and ~~a return on average common equity of 12.01% compared to 1.16% and 12.53% for fourth~~$523 million, or $0.95 per diluted share, in third quarter 2020.

Net interest income of ~~$508~~ $492 million declined ~~$14~~$5 million from ~~fourth~~second quarter ~~2020,~~ ~~driven by~~2021 as the ~~impact~~impacts of a ~~decrease~~reduction in ~~average loans, day count~~net merger-related and PPP loan portfolio benefits and lower ~~short-term~~ rates and spread tightening were partially offset by ~~improved funding costs.~~improvements in deposit pricing and commercial loan growth excluding PPP loans. Compared to third quarter 2020, net interest income decreased $40 million, or 8%, driven

~~The provision~~

by both lower average loan and lease balances and the effect of lower interest rates and spreads.

Provision for credit losses was a benefit of ~~$45~~$85 million ~~for the first~~in third quarter of 2021 compared to a benefit of $115 million in second quarter 2021 and expense of $1$227 million ~~for fourth~~in third quarter 2020, largely reflecting ~~continued~~further improvement in the ~~overall~~ macroeconomic outlook and ~~a reduction in consumer loans~~.positive loan portfolio credit grade migration from the prior year.

Noninterest income of ~~$298~~$247 million ~~increased~~ ~~$10~~decreased $38 million ~~from fourth~~compared to second quarter ~~2020, primarily reflecting strong fixed income offset by decreases in mortgage banking and title income, deposit transaction and cash management fees, deferred compensation and derivative sales.~~

~~Noninterest expense~~ of ~~$544 million~~ ~~increased $36 million~~ ~~from fourth quarter 2020,~~2021, largely as a result of a $23 million loss on debt extinguishment related to the redemption of legacy IBKC ~~merger integration expenses.~~

~~First Quarter 2021 versus First Quarter 2020~~

~~First quarter 2021 net income available to common shareholders was~~ ~~$225 million, or $0.40 per diluted share, compared to $12 million, or $0.04 per diluted share, in first quarter 2020 driven by the impact of the July 1, 2020 IBKC merger~~trust preferred securities and a lower provision for credit losses. First quarter 2021 results produced a return on average assets of 1.12% and a return on average common equity of 12.01% compared to 0.15% and 1.05% for the first quarter 2020.

~~Net interest income increased 68%~~ ~~to $508 million~~ ~~compared to first quarter 2020,~~ ~~driven by an increase in average interest-earning assets as a result of the~~

~~IBKC merger and Truist branch acquisition. Results also reflect the benefit of deposit pricing discipline and PPP lending, which helped to partially offset the impact of lower interest rates.~~

~~The provision for credit losses was a benefit of $45 million for the first quarter of~~ ~~2021,~~ ~~compared to expense of $154 million for first quarter~~ ~~2020. The decrease in provision was primarily attributable to improvement in the overall macro-economic outlook.~~

~~Noninterest income of~~ ~~$298 million~~ ~~increased~~ ~~$124 million from first quarter~~ ~~2020, primarily driven by the impact of the IBKC merger. Results also reflect an increase~~expected declines in fixed ~~income revenue during the quarter.~~

~~Noninterest expense~~ of ~~$544 million~~ ~~increased $242 million~~ ~~from first quarter 2020, largely as a result of the IBKC merger. Noninterest expense for the first quarter of 2021~~ ~~included $70 million in merger and acquisition-related costs compared to $6 million in first quarter 2020.~~

~~Financial Condition Summary~~

~~Total assets at March 31, 2021 of $87.5 billion~~ ~~increased $3.3 billion, or 4%, from $84.2 billion at December 31, 2020.~~

Period-end loans and leases of $58.6 billion increased $368 million, or 1%, from December 31, 2020 driven by a $1.0 billion increase in commercial loans primarily tied to PPP loans, offset by a $674 million decrease in consumer loans. Average loans and leases of $58.2 billion in first quarter ~~2021~~ ~~increased $27.7 billion from $30.5 billion in first quarter~~ ~~2020 primarily driven by the IBKC merger.~~

Period-end deposits of $73.2 billion increased $3.2 billion, or 5%, from December 31, 2020, largely reflecting growth in noninterest-bearing deposits from the impact of stimulus checks and PPP loan funding. Average deposits of $71.0 billion for first quarter ~~2021~~ ~~increased from $32.9 billion for first quarter~~ ~~2020~~.

~~FHN maintained strong capital measures. The Tier 1 risk-based capital and total risk-based capital ratios at~~ ~~March 31, 2021 were 11.05% and 12.84%, respectively, compared to 10.74% and 12.57% at December 31, 2020, respectively. The CET1 ratio was 9.97% at~~ ~~March 31, 2021 compared to 9.68% at~~ ~~December 31, 2020~~.

income and mortgage banking and title fees. Compared with third quarter 2020, noninterest income decreased $576 million largely driven by the $532 million purchase accounting gain related to the IBKC merger in 2020, the $23 million loss on debt extinguishment in 2021, and declines in fixed income and mortgage banking and title fees.

Noninterest expense of $526 million increased $28 million from second quarter 2021, partially driven by a $14 million increase in merger integration expenses. Results were also impacted by higher costs related to investments in new systems and from markets reopening. Compared with third quarter 2020, noninterest expense decreased $61 million largely driven by a $55 million decline in merger and acquisition-related expenses. Merger and acquisition-related expenses were $46 million for the third quarter of 2021 compared to $32 million in second quarter 2021 and $101 million in third quarter 2020.

Year-to-Date and Period End Highlights

For the nine months ended September 30, 2021, net income available to common shareholders was $743 million, or $1.34 per diluted share, compared to $588 million, or $1.50 per diluted share, for the nine months ended September 30, 2020, primarily driven by the impact of the IBKC merger and a reduction in provision for credit losses, partially offset by lower noninterest income tied to the purchase accounting gain from the IBKC merger in third quarter 2020.

Period-end loans and leases of $55.4 billion decreased $2.8 billion, or 5%, from December 31,

2020 largely driven by a $2.0 billion decrease in PPP loans. Average loans and leases of $55.5 billion in third quarter 2021 decreased $4.6 billion from $60.1 billion in third quarter 2020 driven by a decline in PPP and consumer real estate loans.

Period-end deposits of $74.3 billion increased $4.3 billion, or 6%, from December 31, 2020, while average deposits of $73.7 billion in third quarter 2021 increased from $67.1 billion in third quarter 2020, largely reflecting growth in noninterest-bearing deposits from the impact of government stimulus payments, partially offset by a decline in time deposits.

Tier 1 risk-based capital and total risk-based capital ratios at September 30, 2021 were 11.24% and 12.64%, improved from 10.74% and 12.57% at December 31, 2020, respectively. The CET1 ratio was 10.09% at September 30, 2021 compared to 9.68% at December 31, 2020.

The following portions of this MD&A focus in more detail on the results of operations for the three and nine months ended September 30, 2021, the three months ended June 30, 2021, and the three and nine months ended September 30, 2020 and on information about FHN's financial condition, loan and lease portfolio, liquidity, funding resources, capital and other matters.

C&I loans are ~~the~~the largest component of the loan portfolio, ~~comprising 58%~~comprising 57% of total loans at the end of the ~~first~~third quarter 2021 and ~~57% at~~ year-end ~~2020~~.2020. C&I ~~loa~~loans~~ns increased 3%~~

decreased 5% from December 31, 2020, largely ~~driven~~driven by a decrease in PPP ~~lending and~~ ~~higher balances within Specialty Banking, primarily from mortgage warehouse lending and growth in both the accommodation and food services and healthcare industries.~~loans. Commercial real

estate loans ~~increased 2% to $12.5 billion~~decreased slightly in ~~first quarter~~ third quarter 2021 driven by ~~growth in Regional~~lower Specialty Banking ~~and Corporate CRE~~ loans.

Total consumer loans decreased 5%9% from year-end 2020 to ~~$12.2~~$11.7 billion as of ~~March 31,~~September 30, 2021, largely driven by paydowns in real estate installment loans and home

equity lines of credit, primarily within the Regional Banking segment.

Loans Held for Sale

In 2020, FHN obtained IBKC's mortgage banking operations which includes origination and servicing of residential first lien ~~mortgage~~mortgages that conform to standards established by GSEs that are major investors in U.S. home mortgages but can also consist of junior lien and jumbo loans secured by residential property. These loans are primarily ~~fixed rate single-family residential mortgage loans originated by IBKC and committed~~sold to ~~be sold in~~private companies that are unaffiliated with the ~~secondary market.~~ GSEs on a servicing-released basis. For further detail, see Note 6 - Mortgage Banking Activity.

The legacy FHN loans HFS portfolio consists of small business, other consumer loans, ~~the~~ mortgage warehouse, USDA, student, and home equity loans.

On ~~March 31,~~September 30, 2021 and December 31, 2020, loans HFS ~~were $811~~ ~~million~~were $1.1 billion and $1.0 billion, re~~spectively. The~~ ~~decrease in loans HFS was primarily driven by a~~

Industry Concentrations

Loan concentrations exist when there are loans to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Loans to mortgage companies and ~~borrowers~~borrowers in the finance and insurance industry were ~~25%~~26% of FHN’s C&I loan portfolio as of ~~March 31,~~September 30, 2021, and as a result could be affected by items that uniquely impact the financial services industry. As of ~~March 31,~~September 30, 2021, FHN did not have any other concentrations of C&I loans in any single industry of 10% or more of total loans.

Loans to Mortgage Companies

Loans to mortgage companies were 16% of thethe C&I portfolio as of ~~March 31,~~both September 30, 2021 and December 31, 2020. This portfolio generally fluctuates with mortgage rates and seasonal factors and ~~includes~~includes commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Generally, new loan originations to mortgage lenders increases when there is a decline in mortgage rates and decreases when rates rise. In periods of economic uncertainty, this trend may not occur even if interest rates are declining. In ~~first~~third quarter 2021, ~~33%~~56% of the loan originations were home purchases and ~~67%~~44% were refinance transactions. On a year-to-date basis, approximately 54% of originations were refinance transactions.

Finance and Insurance

The finance and insurance component ~~represents 9%~~represented 10% of the C&I portfolio as of ~~March 31,~~September 30, 2021 ~~compared to 10% as of~~and December 31, 2020, and includes TRUPs (i.e., long-term unsecured loans to bank and insurance-related businesses), loans to bank holding companies, and asset-based lending to consumer finance companies. As of ~~March 31,~~September 30, 2021, asset-based lending to ~~consumer~~consumer finance companies represents approximately ~~$1.2~~$1.4 billion of the finance and insurance component.

TRUPs lending was originally extended as a form of “bridge” financing to participants in the pooled trust preferred securitization program offered primarily to smaller banking (generally less than $15 billion in total assets) and insurance institutions through FHN’s fixed income business. Origination of TRUPs lending ceased in early 2008. Individual TRUPs are re-graded at least quarterly as part of FHN’s commercial loan review process. The terms of these loans generally include a scheduled 30 year balloon payoff and include an option to defer interest for up to 20 consecutive quarters. ~~As of March 31, 2021, the unpaid principal balance (UPB) of trust preferred loans totaled $228 million. Including an amortizing discount of $18 million, total reserves (ALLL plus the~~

~~amortizing~~ ~~discount) for TRUPs and other bank-related loans were $28 million, or 12% of outstanding UPB.~~ ~~As of March 31, 2021, TRUPs loans included $7 million of loans on nonaccrual, which represented a single loan relationship.~~

Paycheck Protection Program

In 2020, Congress created the Paycheck Protection Program (PPP). in response to the economic disruption associated with the COVID-19 pandemic. Under the PPP, qualifying businesses may receive loans from private lenders, such as FHN, that are fully guaranteed by the Small Business Administration. These loans potentially are partly or fully forgivable, depending upon the borrower’s use of the funds and maintenance of employment levels. To the extent forgiven, the borrower is relieved from payment while the lender is still paid from the program. ~~Congress~~

The C&I portfolio as of September 30, 2021 includes 17,865 loans made ~~revisions to~~under the PPP ~~during first quarter 2021, and may make further revisions in the future.~~

~~At March 31, 2021, FHN had 44,717 of PPP loans~~ with an aggregate principal balance of ~~$5.1 billion. For these loans, FHN anticipates being paid net lender fees of approximately $81 million in relation~~$2.0 billion, which are fully government guaranteed with the SBA. Due to the government guarantee and forgiveness provisions, PPP loans ~~held at March 31, 2021.~~

~~Because PPP loans carry a full SBA guarantee, they do not~~are considered to have ~~any~~no credit risk and ~~will~~do not affect the amount of provision and ALLL recorded. As a result, no ALLL is recorded for PPP loans as of ~~March 31,~~September 30, 2021, and FHN has

assigned a risk weight of zero to PPP loans for regulatory capital purposes.

For these loans, there are remaining net lender fees of approximately $43 million to be paid to FHN as of September 30, 2021. During 2021, FHN continues to work with its clients that have applied for and received PPP loan forgiveness. Through September 30, 2021, approximately $4 billion of the original $6 billion in PPP loans originated by FHN and IBERIABANK prior to acquisition have been forgiven by the SBA.

Commercial Real Estate

The CRE portfolio ~~totaled~~totale ~~$12.5 billion~~d $12.2 billion as of September 30, 2021 and $12.3 billion as of ~~March 31, 2021 and~~ December 31, ~~2020, respectively~~.2020. The CRE portfolio reflects financings for both commercial construction and nonconstruction loans. The ~~largest~~largest geographical ~~concentrations~~concentrations of CRE loan balances as of ~~March 31,~~September 30, 2021 were in Florida ~~(28%~~(27%), Louisiana ~~(11%), Texas (11%~~(12%), North Carolina (11%), Texas (11%), Tennessee (9%), and Georgia ~~(9%~~(8%). No other state represented more than 5% of the portfolio. This portfolio contains loans, draws on lines, and letters of credit to commercial real estate developers for the construction and ~~mini-permanent~~mini-permanent financing of income-producing real estate. ~~Subcategories~~Subcategories of the CRE portfolio consist of multi-family ~~(27%~~(26%), office ~~(22%~~(23%), retail ~~(18%~~(19%), industrial ~~(11%~~(12%), hospitality (11%), land/land development (2%), and other ~~(9%~~(7%).

Credit Card and Other

The credit card and other portfolio, which is primarily within the Regional Banking segment, ~~totaled~~t ~~$1.1 billion~~otaled $938 million as of ~~March 31, 2021 and~~September 30, 2021. This portfolio primarily ~~includes consumer-related~~consists of consumer-related credits, including home equity and other personal consumer loans, c~~redit~~credit card receivables, and automobile loans. ~~There was no~~

~~significant change in the balance of this portfolio~~The $190 million decrease from December 31, ~~2020.~~2020 was driven by net repayments of consumer construction loans.

Allowance for ~~Loan and Lease~~Credit Losses

~~Management’s policy~~The ACL is ~~to maintain the ALLL~~maintained at a level sufficient to ~~recognize current expected~~provide appropriate reserves to absorb estimated future credit losses onin accordance with GAAP. For additional information regarding the ~~amortized cost~~ACL, see Note 5 of this Report, and "Critical Accounting Policies and Estimates" and Note 5 in FHN's 2020 Form 10-K.

The ALLL decreased to $734 million as of September 30, 2021 from $963 million as of December 31, 2020, reflecting improvement in the macroeconomic forecast compared to 2020, positive grade migration, and lower loan balances. The ALLL

to total loans and leases ratio decreased 33 basis points to 1.32%.

The ACL to total loans and leases ratio was 1.45% as of September 30, 2021 compared to 1.80% as of December 31, 2020.

Consolidated Net Charge-offs

Net charge-offs in third quarter 2021 were $3 million, or an annualized 2 basis points of total loans and leases, compared to net charge-offs of $67 million, or 44 basis points in third quarter 2020.

Net charge-offs in the ~~loan~~commercial portfolio in third quarter 2021 were $4 million compared to charge-offs of $68 million in third quarter 2020. Charge-offs in the prior year were primarily related to energy-related C&I loans. The decrease in net charge-offs also reflects continued improvement in overall asset quality.

Net recoveries in the consumer portfolio were $1 million in third quarter 2021 compared to $1 million in net recoveries in third quarter 2020.

Nonperforming Assets

Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, if impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or (on a case-by-case basis), if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans ~~that~~for which FHN continues to receive payments, including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy. NPAs consist of nonperforming loans and OREO (excluding OREO from government insured mortgages).

~~Total~~

Reflecting an overall improvement in asset quality, total NPAs (including NPLs HFS) ~~increased~~decreased to ~~$410~~$361 million as of ~~March 31,~~September 30, 2021 from $406 million as of

December 31, ~~2020. Despite the marginal increase, the~~2020, driven by lower consumer real estate NPAs. The nonperforming assets ratio (nonperforming assets excluding NPLs HFS to total period-end ~~loa~~nsloans plus OREO) was ~~0.69%~~0.64% as of ~~both March 31,~~September 30, 2021, ~~and December 31, 2020. The ratio of the ALLL to NPLs was 2.3 times as of March 31, 2021 compared to 2.5 times~~down 5 basis points from 0.69% as of December 31, 2020.

Certain nonperforming loans in both the commercial and consumer portfolios are deemed collateral-dependent and are charged down to an estimate of collateral value less costs to sell. Because the estimated loss has been recognized through a partial charge-off, typically an ALLL is not recorded.

In addition to PPP loans, other customer support initiatives in response to the COVID-19 pandemic include incremental lending assistance for borrowers through delayed payment programs and fee waivers.

The following table provides the UPB of loans related to deferrals granted to FHN’s customers ~~that have been processed through March~~as of September 30, 2021 and December 31, ~~2021.~~2020.

Potential problem assets represent those assets where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms and includes loans past due 90 days or more and still accruing. This definition is believed to be substantially consistent with the standards established by Federal banking regulators for loans classified as ~~substandard.~~substandard. Potential problem assets in the loan po~~rtfolio~~portfolio were ~~$738~~$607 million on ~~March 31,~~September 30, 2021 and $718 million on December 31, 2020. The ~~increase~~decrease was attributable to an overall improvement in ~~potential problem assets was from a net increase in classified commercial loans within the C&I portfolio from a limited number of~~

~~customer migrations to substandard loans in the current quarter.~~asset quality. The current expectation of losses from potential problem assets

has been included in management’s analysis for assessing the adequacy of the allowance for loan and lease losses.

Troubled Debt Restructurings and Loan Modifications

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when appropriate to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to

~~internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to~~ the borrower and is evaluated separately. In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, FHN identifies and reports that loan as a TDR.

For loan modifications that were made during 2021 and 2020 that met the TDR relief provisions outlined in either the CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has excluded these modifications from consideration as a TDR and has excluded loans with these qualifying modifications from designation as a TDR in the

information and discussion that follows. See Note 4 –

Loans and Leases for further discussion regarding TDRs and loan modifications.

On ~~March 31,~~September 30, 2021 and December 31, 2020, FHN had ~~$288~~$239 million and $307 million portfolio loans classified as TDRs, respectively. For these TDRs, ~~in the loan portfolio,~~including specific reserves, FHN had an allowance for loan ~~loss reserves~~and lease losses of ~~$11 million and $12~~$10 million, or 4% of TDR balances as of ~~both March 31,~~September 30, 2021, and $15 million, or 5% of TDR balances, as of December 31, ~~2020, respectively.~~2020. Additionally, FHN had ~~$41~~$37 million and $42 million of HFS loans classified as TDRs as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Investment Securities

FHN’s investment securities portfolio consists principally of debt securities ~~including~~available for sale. FHN maintains a highly-rated securities portfolio consisting primarily of government agency issued mortgage-backed securities and ~~government agency issued~~ collateralized mortgage obligations ~~all of~~

~~which are classified as AFS. The~~. The securities portfolio provides a source of income and liquidity and is an important tool used to balance the interest rate risk of the loan and deposit portfolios. The securities portfolio is periodically evaluated in light of established ALM objectives, changing market

Short-Term Borrowings

Total short-term borrowings were ~~$2.2~~$2.2 billion asas of ~~March 31,~~September 30, 2021 and December 31, 2020.

Short-term borrowings balances fluctuate largely based on the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. Federal funds purchased fluctuates depending on the amount of excess funding of FHN’s correspondent bank customers. Balances of securities sold under agreements to

resell fluctuate based on cost attractiveness relative to FHLB borrowing levels and the ability to pledge securities toward such transactions.

Term Borrowings

Term borrowings include senior and subordinated borrowings with original maturities greater than one

year. Term borrowings were ~~$1.7~~$1.6 billionas of ~~March 31,~~September 30, 2021 ~~and~~compared with $1.7 billion as of December 31, 2020.

During the third quarter 2021, FHN redeemed $80 million of legacy IBKC junior subordinated debt underlying multiple issuances of trust preferred securities and provided notice of redemption for the remaining $13 million in fourth quarter 2021. The redemption resulted in a loss on debt extinguishment of $23 million during the third quarter 2021, while the redemption in fourth quarter 2021 is expected to result in an additional loss of $3 million.

Management’s objectives are to provide capital sufficient to cover the risks inherent in FHN’s businesses, to maintain excess capital to well-capitalized standards, and to assure ready access to the capital markets. Total equity was ~~$8.3~~$8.5 billion at ~~both March 31,~~September 30, 2021 and $8.3 billion at December 31, 2020.

S~~ignificant~~Significant changes included net income of ~~$236~~

$781 million and the issuance of $145 million in Series F preferred stock, which ~~was~~were offset by $276 million in common and preferred dividends, $272 million in common share repurchases, $100 million from the call of Series A preferred stock and a decrease in AOCI of $101 ~~million, $92 million in common and preferred dividends, and $62 million in common share repurchases.~~

There have been no significant changes to FHN’s risk management practices as described under “Risk Management” included in Item 7 of FHN’s 2020 Annual Report on Form 10-K.

MARKET RISK MANAGEMENT

Value-at-Risk and Stress Testing

VaR is a statistical risk measure used to estimate the potential loss in value from adverse market movements over an assumed fixed holding period within a stated confidence level. FHN employs a model to compute daily VaR measures for its trading

securities inventory. FHN computes VaR using historical simulation with a 1-year lookback period at a 99% confidence level ~~and~~with 1-day and 10-day time horizons. Additionally, FHN computes a Stressed VaR measure. The SVaR computation uses the same model but with model inputs reflecting historical data from a continuous 12-month period that reflects a period of significant financial stress appropriate for ~~our~~the trading securities portfolio.

The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static. Because FHN Financial procures fixed income securities for purposes of distribution to clients, its trading securities inventory turns over regularly. Additionally, FHNF traders actively manage the trading securities inventory continuously throughout each trading day. Accordingly, ~~FHN’s~~FHNF’s trading securities inventory is highly dynamic, rather than

static. As a result, it would be rare for FHNF to incur a negative revenue day in its fixed income activities ofat the ~~level~~levels indicated by its VaR ~~measurements.~~measures.

In addition to being used in FHN’s daily market risk management process, the VaR and SVaR measures are also used by FHN in computing its regulatory market risk capital requirements in accordance with the Market Risk Capital rules. For additional

with oversight responsibility for FHN’s model risk management.

INTEREST RATE RISK MANAGEMENT

Net Interest Income Simulation Analysis

The information provided in this section, including the discussion regarding the outcomes of simulation analysis and rate shock analysis, is forward-looking. Actual results, if the assumed scenarios were to occur, could differ because of interest rate movements, the ability of management to execute its business plans, and other factors, including those presented in the Forward-Looking Statements section of this Report.

Management uses a simulation model to measure interest rate risk and to formulate strategies to improve balance sheet positioning, earnings, or both, within FHN’s interest rate risk, liquidity, and capital guidelines. Interest rate exposure is measured by forecasting 12 months of NII under various interest rate scenarios and comparing the percentage change in NII for each scenario to a base case scenario where interest rates remain unchanged. Assumptions are made regarding future balance sheet composition, interest rate movements, and loan and deposit pricing. In addition, assumptions are made about the magnitude of asset prepayments and earlier than anticipated deposit withdrawals. The results of these scenarios help FHN develop strategies for managing exposure to interest rate risk. While management believes the assumptions used and scenarios selected in its simulations are reasonable, simulation modeling provides only an estimate, not a precise calculation, of exposure to any given change in interest rates.

Based on a static balance sheet as of ~~March 31,~~September 30, 2021, NII exposures over the next 12 months assuming rate shocks of plus 25 basis points, 50 basis points, 100 basis points, and 200 basis points are estimated to have favorable variances ~~of 2.5%, 4.7%, 9.3%, and 16.0%, respectively compared to~~as shown in the table below.

Table 23 - Interest Rate Sensitivity


Shifts in Interest Rates (in bps)						% Change in Projected Net Interest Income
+25						3.7%
+50						7.5%
+100						15.8%
+200						28.0%

~~base NII.~~ A steepening yield curve scenario where long-term rates increase by 50 basis points and short-term rates are static, results in a favorable NII variance o~~f 0.7%~~ of 0.9%..

A flattening yield curve scenario where long-term rates decrease by 50 basis points and short-term rates are static, results in an unfavorable NII variance o~~f 0.9%~~of 1.1%. Rate shocks of minus 25 basis points and 50 basis points result in unfavorable NII variances of ~~1.7%~~1.8% and ~~2.0%~~2.4%, assuming the absence of negative rates. These hypothetical scenarios are used to create a risk measurement framework, and do not necessarily represent management’s current view of future interest rates or market developments.

FHN’s net interest income has been, and likely will continue to be, impacted by the disruption from the COVID-19 pandemic and the low rate environment.

sales, syndications, and access to the Federal Reserve Bank.

Core deposits are a significant source of funding and have historically been a stable source of liquidity for banks. Generally, core deposits represent funding from a financial institution's ~~customer~~client base which provide inexpensive, predictable pricing. The ratio of total loans, excluding loans HFS and restricted real estate loans, to core deposits ~~was~~ wa~~86%~~ s 81% f~~for March 31,~~or September 30, 2021 and 97% for December 31, 2020.

FHN may also use unsecured short-term borrowings as a source of liquidity. Federal funds purchased from correspondent bank clients are considered to be

substantially more stable than funds purchased in the national broker markets for federal funds due to the long, historical, and reciprocal nature of banking services provided by FHN to these correspondent banks. The remainder of FHN’s wholesale short-term borrowings consists of securities sold under agreements to repurchase transactions accounted for as secured borrowings with business clients or broker dealer counterparties.

Both FHN and First Horizon Bank have the ability to generate liquidity by issuing senior or subordinated unsecured debt, preferred equity and common equity, subject to market conditions and compliance with applicable regulatory requirements. In May 2021, FHN issued $150 million of Series F Non-Cumulative Perpetual Preferred Stock and in July 2021 redeemed its $100 million Series A Non-Cumulative Perpetual Preferred Stock. As of ~~March 31,~~September 30, 2021, FHN had outstanding $1.3 billion in senior and subordinated unsecured debt and ~~$470~~$520 million in non-cumulative perpetual preferred stock. As of ~~March 31,~~September 30, 2021, First Horizon Bank and subsidiaries had outstanding preferred shares of $295 million, which are reflected as noncontrolling interest on the Consolidated Balance Sheets.

Parent company liquidity is primarily provided by cash flows stemming from dividends and interest payments collected from subsidiaries. These sources of cash

represent the primary sources of funds to pay cash dividends to shareholders and principal and interest to debt holders of FHN. Applying the dividend restrictions imposed under applicable federal and state rules as outlined above, the Bank’s total amount available for dividends was ~~$969 million~~$1.2 billion as of ~~April~~October 1, 2021.

First Horizon Bank declared and paid common dividends to the parent company in the amount of $183 million in first, second and third quarter 2021, $223 million in fourth quarter 2021 and ~~$65~~$180 million in ~~first quarter~~ 2020. First Horizon Bank ~~declared preferred dividends in the first quarter of 2021 which were payable in April 2021 and declared and~~ paid preferred dividends in each quarter of 2021 and 2020.

Payment of a dividend to shareholders of FHN is dependent on several factors which are considered by the Board. These factors include FHN’s current and prospective capital, liquidity, and other needs, applicable regulatory restrictions, and availability of funds to FHN through a dividend from First Horizon Bank. Additionally, banking regulators generally require insured banks and bank holding companies to pay cash dividends only out of current operating earnings. ~~Consequently, the decision~~ ~~of whether FHN will pay future dividends and the amount of dividends will be affected by current operating results.~~

FHN paid a cash dividend of $0.15 per common share on ~~April~~October 1, 2021. FHN paid cash dividends of ~~$1,550 per Series A preferred share and $1,625~~$1,625.00 per Series E preferred share, and $1,175.00 per Series F preferred share on ~~April~~October 12, 2021 and ~~$165~~$165.00 per Series C preferred share and ~~$305~~$305.00 per Series D preferred share on ~~May 3,~~November 1, 2021. In addition, in ~~April~~October 2021, the Board approved cash dividends per share in the following amounts:

Repurchase Obligations

Prior to September 2008, FHN originated loans through its pre-2009 mortgage business, primarily first lien home loans, with the intention of selling them. As discussed in Note 11 - Contingencies and Other Disclosures, FHN's principal remaining exposures for those activities relate to (i) indemnification claims by underwriters, loan purchasers, and other parties which assert that ~~FHN-originated~~FHN-

originated loans caused or contributed to losses which FHN is legally obliged to indemnify, and (ii) indemnification or other claims related to FHN's servicing of pre-2009 mortgage loans.

FHN’s approach for determining the adequacy of the repurchase and foreclosure reserve has evolved, sometimes substantially, based on changes in information available. Repurchase/make-whole rates vary based on purchaser, vintage, and claim type. For

those loans repurchased or covered by a make-whole payment, cumulative average loss severities range between 50 and 60 percent of the UPB.

Repurchase Accrual Approach

In determining potential loss content, claims are analyzed by purchaser, vintage, and claim type. FHN considers various inputs including claim rate estimates, historical average repurchase and loss severity rates, mortgage insurance cancellations, and mortgage insurance curtailment requests. Inputs are applied to claims in the active pipeline, as well as to historical average inflows to estimate loss content related to potential future inflows. Management also evaluates the nature of claims from purchasers and/or servicers of loans sold to determine if qualitative adjustments are appropriate.

Repurchase and Foreclosure Liability

FHN’s repurchase and foreclosure liability, primarily related to its pre-2009 mortgage business, is comprised of accruals to cover estimated loss content

in the active pipeline (consisting of mortgage loan repurchase, make-whole, foreclosure/servicing demands and certain related exposures), estimated future inflows, and estimated loss content related to certain known claims not currently included in the active pipeline. The liability contemplates repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with loan populations excluded from the settlements with the

GSEs, as well as other whole loans sold, mortgage insurance ~~cancellations~~cancellation rescissions, and loans included in bulk servicing sales effected prior to the settlements with the GSEs. FHN compares the estimated probable incurred losses determined under the applicable loss estimation approaches for the respective periods with current reserve levels. Changes in the estimated required liability levels are recorded as necessary through the repurchase and foreclosure provision. The repurchase and foreclosure liability was $16 million as of ~~March 31,~~September 30, 2021 and December 31, 2020.

Off-Balance Sheet Arrangements

In the normal course of business, FHN is a party to a number of activities that contain credit, market and operational risk that are not reflected in whole or in part in the consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments. FHN provides customers with off-balance sheet credit support through loan commitments, lines of credit, and standby letters of credit. Many of the commitments are expected to expire unused or be only partially used; therefore, the total amount of commitments does not necessarily represent future cash requirements. Based on its available liquidity and available borrowing capacity, FHN anticipates it will continue to have sufficient funds to meet its current commitments.

FHN’s future results could be affected both positively and negatively by several known trends. Key among those are changes in the U.S. and global economy and outlook, government actions affecting interest rates, government actions intended to stimulate the economy, and government actions and proposals which could have negative impacts on the ~~availability and administration of stimulus relief for the economy.~~economy at large or on certain businesses. Additional ~~impacts include~~risks relate to how the COVID-19 pandemic ~~affects~~continues to affect FHN’s clients, ~~as well as~~ political uncertainty, ~~potential~~ changes in federal policies (including those publicly discussed, formally proposed, or recently implemented) and the potential ~~impact to~~impacts of those changes on our businesses and clients, and whether FHN’s strategic initiatives. The global COVID-19 pandemic has led to periods of significant volatility in financial commodities (including oil and gas) and other markets, and has adversely affected FHN’s and its clients' ability to conduct normal business, and could harm FHN’s business and future results of operations.initiatives will succeed.

Federal Reserve Easing Policy

In March 2020, the Federal Reserve ~~lowered~~"eased" by lowering short-term interest rates ~~twice~~ and ~~started a “quantitative easing”~~starting an asset purchase program intended to lower longer-term interest rates and foster access to credit. The effective yields of 10-year and 30-year U.S. Treasury

securities achieved record low rates and the U.S. Congress enacted relief legislation which, among other things, was intended to provide emergency credit to businesses at risk for failure from government and public actions related to the COVID-19 pandemic, and to mitigate the severity of an economic recession.rates. These changes in interest rates and the volatility in the market negatively impacted FHN’s net interest margin. Amortization of net processing fees related to government relief programs associated with the COVID-19 pandemic, including the Paycheck Protection Program, ~~has~~ offset a portion of the net interest margin decline.

~~COVID-19 Pandemic~~

Government and societal reaction to the COVID-19 pandemic caused extraordinary disruption to the U.S. economy, as well as to the local economies within FHN's footprint, during the final three quarters of 2020 and continuing into the first quarter of 2021. Business activity, especially lending, declined throughout 2020 and into first quarter this year. In certain business lines, FHN reduced or stopped new lending becauseDuring 2021, easing policy has continued. For most of the ~~pandemic.~~

~~In the fourth quarter of 2020, two extremely effective vaccines were approved in the U.S. Administration of those vaccines began late in 2020, nationwide~~year interest rates have fluctuated but on a narrowly targeted basis. In the first quarter of 2021, vaccine production and distribution increased, and a third vaccine was approved in the U.S. Public vaccination in the U.S. has accelerated during the first four months of 2021. In many ofremained very low, continuing to adversely impact FHN's markets, COVID-19 restrictions at least partially were eased by the end of March or during April, and FHN believes further easing is likely in the rest of 2021. COVID-19 restrictions still had a substantial impact on FHN and its clients in the first quarter of 2021, but FHN expects those impacts to diminish over the rest of this year as the vaccinated percentage of the U.S. population continues to climb. Within the U.S. economy, broadly speaking, manufacturing has largely recovered while services continue to lag significantly, especially in hospitality and leisure.

Risk of resurgence remains as new virus variants continue to be identified around the world. As a result, FHN continues to closely monitor the pandemic and its effects on clients, especially credit quality, on FHN's communities, and on the financial markets. FHN continues to reach out to clients to discuss challenges and solutions, to provide line draws and new extensions to existing clients, to provide support for small businesses through the Paycheck Protection Program and other stimulus programs, and to provide lending and deposit assistance through deferrals and waived fees.

~~LIBOR Reform~~

~~In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London Inter-Bank Offered Rate (LIBOR),~~net interest margin. The Federal Reserve recently announced that it ~~intends~~will begin to ~~halt persuading~~reverse its easing policy by reducing ("tapering") its asset purchases. The Federal Reserve's public comments suggest (without any guarantee) that tapering will conclude at some point mid-2022, after which no further asset purchases will be made. FHN cannot predict whether short term interest rates will be raised during this taper period or ~~compelling banks to submit~~at any other point in time. Long term interest rates ~~for the calculation of LIBOR after 2021.~~

In March 2021, the United Kingdom’s Financial Conduct Authority (the “FCA”), the governmental regulator of the administrator of LIBOR, announced that U.S. Dollar LIBOR will no longer be representative as of:

•~~One week and two month USD LIBOR after December 31, 2021; and~~

•~~All other USD LIBOR tenors (e.g., overnight, 1-month, 3-month, 6-month and 12-month tenors) after June 30, 2023.~~

have risen recently, though they remain very low by historical standards. Public

expectations related to tapering, coupled with public Federal Reserve comments and concerns about inflation in the U.S., likely have been significant contributors to that change.

COVID-19 Pandemic

The ~~administrator~~COVID-19 pandemic caused extraordinary disruption that negatively impacted the economy and business activity, especially lending (other than lending related to home mortgages). The impact of the pandemic on FHN's performance is discussed further in "Results of Operations". During the latter part of the second quarter and into the third quarter of 2021, FHN saw the lending pipeline start to improve in several areas (unrelated to home mortgages) as COVID-19 restrictions were at least partially eased in many of FHN's markets. FHN expects the impact of COVID-19 restrictions to continue to diminish over the rest of this year with further progress in vaccination rates; however, the risk of resurgence remains.

FHN continues to closely monitor the impact of the pandemic and its effects on FHN's clients and communities and on the financial markets. Throughout the pandemic, FHN has worked with clients to discuss challenges and solutions, provide line draws and new extensions to existing clients, provide support for small businesses (including lending through the PPP), and provide lending and deposit assistance through deferrals and waived fees.

LIBOR & Reference Rate Reform

LIBOR

The London Inter-Bank Offered Rate ("LIBOR") is the most widely used reference rate in the world and has been for many years. A substantial majority of FHN's floating rate loans use LIBOR, denominated in U.S. Dollars ("USD"), as the reference rate to determine the interest rate paid by the client/borrower. In addition, certain floating-rate securities issued by FHN use USD LIBOR as the reference rate.

LIBOR is based on a mix of transaction-based data and expert judgment about market conditions. Before 2014, it was based mainly on expert judgment. It is published in different tenors, which are time periods such as 1-week, 1-month, 12-month, etc.

LIBOR Discontinuance

About a decade ago, evidence emerged that some members of the panel that set LIBOR may have manipulated the published LIBOR rates rather than using strictly good-faith judgments. Several banks were fined.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority (the “FCA”)—the governmental regulator of LIBOR—announced that it intends to halt persuading or compelling banks to submit rates for the calculation of LIBOR ~~thereafter~~after 2021. In 2021, the FCA announced that tenors of USD LIBOR will ~~cease to~~no longer be published ~~immediately~~as follows:

•One week and 2-month USD LIBOR will not be published after ~~the dates set out above.~~December 31, 2021; and

•All other USD LIBOR tenors (e.g., overnight, 1-month, 3-month, 6-month and 12-month tenors) will not be published after June 30, 2023.

~~Previous to these announcements, the Board of Governors of~~

U.S. Regulatory Position

In 2020, the Federal Reserve, ~~System,~~ the ~~Office of the Comptroller of the Currency,~~OCC, and the ~~Federal Deposit Insurance Corporation issued SR 20-27 to encourage~~FDIC jointly encouraged U.S. banks to transition away from ~~U.S. dollar~~ LIBOR for new contracts as soon as practicable and, in any event, by December 31, 2021. They noted that entering into new contracts that use LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks. As

Alternatives to LIBOR

LIBOR became the market-preferred reference rate because it was perceived by lenders and borrowers as being superior to alternatives in a ~~result,~~wide range of circumstances. FHN believes that no single alternative reference rate will immediately replace LIBOR for USD transactions. Instead, FHN believes it is likely that different alternatives will be used in different circumstances. Although it is difficult to predict which alternatives will be favored by market participants in any particular situation, at this time it seems likely that the following alternative reference rates may be used by market participants once USD LIBOR is discontinued:

•SOFR. The Alternative Reference Rates Committee (“ARRC”) is a group of private-market and financial regulator participants convened by the Federal Reserve and the New York Federal Reserve Bank to help ensure a successful transition from USD LIBOR to a more robust reference rate. The ARRC has recommended the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative. SOFR is based on actual transaction data for the U.S. Treasury repurchase market. Accordingly, SOFR represents a riskless secured overnight rate.

•Term SOFR. Published by CME Group, Term SOFR is a forward-looking rate, with 1-month, 3-month and 6-month tenors, and is based on

SOFR futures contracts. The ARRC has recommended conventions for Term SOFR rates and has recommended CME Group as the administrator for Term SOFR.

•AMERIBOR.The American Interbank Offered Rate (“AMERIBOR”) Index is produced by the American Financial Exchange. AMERIBOR is based on actual transaction data involving credit decisions by many financial institutions, on an unsecured basis.

•BSBY. The Bloomberg short-term bank yield index ("BSBY") is a proprietary rate index calculated and published by Bloomberg Index Services Limited. BSBY is based on actual transaction data involving unsecured credit.

•Prime. Although traditional prime rates (with each bank setting its own) are not likely to regain the prominence they had decades ago when U.S. banks were much smaller and the industry was more fragmented, for some clients and products banks may increase their usage of prime rates.

Other alternative reference rates are being developed and considered. The alternatives listed above are those FHN currently expects to make available to the majority of commercial clients in November 2021.

Each alternative reference rate has advantages and disadvantages compared with other alternatives in various circumstances. Despite being supported by the Federal Reserve's ARRC, SOFR appears unlikely to gain the level of market acceptance and usage that USD LIBOR enjoyed within the U.S. Key aspects of SOFR that support this view are: (a) SOFR fundamentally is an overnight rate, and so is not easily or reliably translated into typical LIBOR tenors; and (b) SOFR is both secured and riskless, and so does not necessarily track a bank's cost of funds very well. For a bank, it is critical to avoid significant mismatches over time between its (variable) cost of funds and its (variable) interest income. Term SOFR attempts to address some of these shortcomings, but not all of them.

All of the alternative reference rates selected by FHN to date meet the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, as affirmed by the rate administrator and/or an independent auditor. While banking regulators have stated that banks are free to choose the index rates they offer clients, some public sector officials have urged caution in using the new credit sensitive alternative reference rates, primarily due to the robustness of underlying data used to derive the rates. More specifically, there is concern of

an “inverted pyramid” effect where a large number of financial contracts could be priced using an index derived from a relatively low volume of transactions. In an interagency statement on October 20, 2021, U.S. banking regulatory agencies noted that “supervised institutions should understand how their chosen reference rate is constructed and be aware of any fragilities associated with that rate and the markets that underlie it”. IOSCO has also warned of the potential for the “inverted pyramid” problem and will monitor how the IOSCO label is used by administrators.

FHN is monitoring the credit sensitive reference rates and regulatory guidance around use of such rates. FHN plans to limit use of credit sensitive rates to commercial loans (~2% of global USD LIBOR market) and related customer swaps (pending development of derivatives markets for these rates). Additionally, FHN expects that each financial contract will contain fallback language to guide transition from a credit sensitive rate to an alternative should that action be ~~required~~deemed necessary in the future.

FHN's Actions to Date & Transition Plans

Starting in 2019, legacy First Horizon and legacy IBERIABANK both modernized the fallback language used in their loan documentation to better handle how floating rate loans would be re-set if LIBOR ceased to be published during the loan term.

In 2021, FHN began to notify clients whose loans are based on 1-week or 2-month USD LIBOR, which will cease at the end of 2021, and began re-negotiating terms with those clients. Only a small portion of FHN's clients have such loans.

FHN currently plans to cease using USD LIBOR for new lending in fourth quarter 2021. Prior to the June 30, 2023 cessation date for other USD tenors, FHN plans to re-negotiate terms with all clients who have LIBOR loans which extend beyond that date.

FHN has developed a go-to-market strategy and pricing plan for offering LIBOR alternatives to commercial clients for new and renewing loans. Each of the leading alternatives mentioned above is undergoing further development and refinement, and it remains unclear which alternative(s) FHN and its clients generally will prefer, and in which situations. Given these considerations, FHN's plans may change to meet evolving market conditions and preferences. Updates to systems and processes needed to implement the alternative reference rates are being finalized.

On the consumer side, the only LIBOR-based product FHN currently offers is adjustable rate mortgages. For new originations, these products will transition ~~away from LIBOR~~to

SOFR beginning in November 2021. SOFR is emerging as a market standard for adjustable rate mortgages and is the conforming convention for Fannie Mae and Freddie Mac.

FHN is ~~not currently able to predict~~assessing the ~~impact that the transition from LIBOR will have~~potential impacts on ~~FHN; however, because FHN has instruments with floating rate terms based on LIBOR, FHN may experience increases in interest, dividends,~~LIBOR-based securities and ~~other costs relative to these instruments subsequent to 2021. Additionally, the~~derivative instruments.

Financial Accounting Aspects

The transition from LIBOR could impact or change FHN’s hedge accounting practices.

FHN has initiated efforts to 1) develop an inventory of affected loans, securities, and derivatives, 2) evaluate and assess modifications as needed to address loans outstanding at the time of LIBOR discontinuance, 3) obtain an understanding of the potential effects for applicable securities and derivatives, 4) assess revisions to systems, processes, and pricing needed to implement alternative reference rates, and 5) update fallback language for all new loans that reference LIBOR.

In ~~March~~ 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides several optional expedients and exceptions to ease the potential burden in accounting for reference rate reform. The

~~reform. The~~ scope of ASU 2020-04 was expanded ~~with the January~~in 2021 ~~issuance of~~with ASU 2021-01, "Scope". Refer to the Accounting Changes Issued but Not Currently Effective section of Note 1 - Basis of Presentation and Accounting Policies for additional information. ~~Additionally, the~~

U.S. Tax Accommodation

The IRS has released guidance that is intended to facilitate the transition of existing contracts from LIBOR to new reference rates without triggering modification accounting or taxable exchange treatment for those contracts. This guidance specifies what must be met in order to qualify for the beneficial transition approach and FHN is considering this guidance in its transition plans.

~~Limited Data Security Incident~~

In mid-April, FHN became aware of a data security incident affecting a limited number of customer accounts. Based on its ongoing investigation, FHN determined that an unauthorized party had obtained login credentials from an unknown source and attempted access to client accounts. Using the credentials and exploiting a vulnerability in third-party security software, the unauthorized party gained unauthorized access to under 200 on-line client bank accounts, had access to personal information in those accounts, and fraudulently obtained an aggregate of less than $1 million from some of those accounts. FHN has remediated the software vulnerability, reset the passwords for the identified accounts, is working with the affected clients to close existing accounts and open new ones, has reimbursed clients for the stolen funds, and has notified the appropriate regulators and enforcement authorities. Based on its ongoing assessment of the incident to date, FHN does not believe that this event will have a material adverse effect on its business, results of operations, or financial condition.

FHN has made no significant changes in its critical accounting policies and estimates from those disclosed in its 2020 Annual Report on Form 10-K.

Accounting Changes With Extended Transition Periods

Refer to Note 1 – Basis of Presentation and Accounting Policies for a detail of accounting changes with extended transition periods, which section is incorporated into MD&A by this reference.

Table ~~20—~~24—Non-GAAP to GAAP Reconciliation


TN		62-0803242
(State or other jurisdiction incorporation of organization)		(IRS Employer Identification No.)

165 Madison Avenue
Memphis,	Tennessee	38103
(Address of principal executive office)		(Zip Code)


Class						Outstanding on ~~March 31,~~October 29, 2021
Common Stock, $.625 par value						~~552,374,489~~540,750,202



Glossary of Acronyms and Terms			1
~~Forward Looking~~Forward-Looking Statements			3
Non-GAAP Information			4

Part I. Financial Information			5
Item 1. Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			6872
Item 3. Quantitative and Qualitative Disclosures about Market Risk			99110
Item 4. Controls and Procedures			99110

Part II. Other Information			~~100~~111
Item 1. Legal Proceedings			~~100~~111
Item 1A. Risk Factors			~~100~~111
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			~~100~~111
Item 3. Defaults Upon Senior Securities			~~100~~111
Item 4. Mine Safety Disclosures			~~100~~111
Item 5. Other Information			~~100~~111
Item 6. Exhibits			~~101~~112









Signatures			~~103~~113


Consolidated Balance Sheets (unaudited)			6

Consolidated Statements of Income (unaudited)			7

Consolidated Statements of Comprehensive Income (unaudited)			89

Consolidated Statements of Changes in Equity (unaudited)			910

Consolidated Statements of Cash Flows (unaudited)			1012

Notes to Consolidated Financial Statements (unaudited)			1113
Note 1 Basis of Presentation and Accounting Policies			1113
Note 2 Acquisitions and Divestitures			1214
Note 3 Investment Securities			1416
Note 4 Loans and Leases			1719
Note 5 Allowance for Credit Losses			2527
Note 6 Mortgage Banking Activity			2729
Note 7 Goodwill and Other Intangible Assets			2830

Note 8 Preferred Stock			2931
Note 9 Components of Other Comprehensive Income (Loss)			3032
Note 10 Earnings Per Share			3134
Note 11 Contingencies and Other Disclosures			3235
Note 12 R ~~etirement~~Retirement Plans			3537
Note 13 Business Segment Information			3638
Note 14 Variable Interest Entities			3943
Note 15 Derivatives			4246
Note 16 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions			4953
Note 17 Fair Value of Assets and Liabilities			5155
~~Note 18 Other Events~~			67


		(Unaudited)		December 31,			(Unaudited)		December 31,
		March 31,					September 30,
(Dollars in millions, except per share amounts)	(Dollars in millions, except per share amounts)	2021		2020		(Dollars in millions, except per share amounts)	2021		2020
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	1,169	$	1,203	Cash and due from banks	$	1,197	$	1,203
Interest-bearing deposits with banks	Interest-bearing deposits with banks	11,635		8,351		Interest-bearing deposits with banks	14,829		8,351
Federal funds sold and securities purchased under agreements to resell	Federal funds sold and securities purchased under agreements to resell	520		445		Federal funds sold and securities purchased under agreements to resell	361		445
Trading securities	Trading securities	1,076		1,176		Trading securities	1,319		1,176
Securities available for sale at fair value	Securities available for sale at fair value	8,351		8,047		Securities available for sale at fair value	8,494		8,047
Loans held for sale (including $449 and $405 at fair value, respectively)		811		1,022
Loans and leases (including $17 and $16 at fair value, respectively)		58,600		58,232
Securities held to maturity (fair value of $303 and $10, respectively)						Securities held to maturity (fair value of $303 and $10, respectively)	304		10
Loans held for sale (including $301 and $405 at fair value, respectively)						Loans held for sale (including $301 and $405 at fair value, respectively)	1,052		1,022
Loans and leases (including $— and $16 at fair value, respectively)						Loans and leases (including $— and $16 at fair value, respectively)	55,435		58,232
Allowance for loan and lease losses	Allowance for loan and lease losses	(914)		(963)		Allowance for loan and lease losses	(734)		(963)
Net loans and leases	Net loans and leases	57,686		57,269		Net loans and leases	54,701		57,269
Premises and equipment	Premises and equipment	719		759		Premises and equipment	692		759
Goodwill	Goodwill	1,511		1,511		Goodwill	1,511		1,511
Other intangible assets	Other intangible assets	339		354		Other intangible assets	311		354
Other assets	Other assets	3,696		4,072		Other assets	3,766		4,062
Total assets	Total assets	$	87,513	$	84,209	Total assets	$	88,537	$	84,209

Liabilities	Liabilities					Liabilities
Noninterest-bearing deposits	Noninterest-bearing deposits	$	25,046	$	22,173	Noninterest-bearing deposits	$	27,348	$	22,173
Interest-bearing deposits	Interest-bearing deposits	48,120		47,809		Interest-bearing deposits	46,916		47,809
Total deposits	Total deposits	73,166		69,982		Total deposits	74,264		69,982
Trading liabilities	Trading liabilities	454		353		Trading liabilities	315		353
Short-term borrowings	Short-term borrowings	2,203		2,198		Short-term borrowings	2,225		2,198
Term borrowings	Term borrowings	1,671		1,670		Term borrowings	1,584		1,670
Other liabilities	Other liabilities	1,712		1,699		Other liabilities	1,617		1,699
Total liabilities	Total liabilities	79,206		75,902		Total liabilities	80,005		75,902

Equity	Equity					Equity
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 26,250 shares		470		470
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 552,374,489 and 555,030,652 shares, respectively		345		347
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 26,750 and 26,250 shares, respectively						Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 26,750 and 26,250 shares, respectively	520		470
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 541,859,599 and 555,030,652 shares, respectively						Common stock, $0.625 par value; authorized 700,000,000 shares; issued 541,859,599 and 555,030,652 shares, respectively	339		347
Capital surplus	Capital surplus	5,036		5,074		Capital surplus	4,866		5,074
Retained earnings	Retained earnings	2,402		2,261		Retained earnings	2,753		2,261
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(241)		(140)		Accumulated other comprehensive loss, net	(241)		(140)
FHN shareholders' equity	FHN shareholders' equity	8,012		8,012		FHN shareholders' equity	8,237		8,012
Noncontrolling interest	Noncontrolling interest	295		295		Noncontrolling interest	295		295
Total equity	Total equity	8,307		8,307		Total equity	8,532		8,307
Total liabilities and equity	Total liabilities and equity	$	87,513	$	84,209	Total liabilities and equity	$	88,537	$	84,209


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Basic earnings per common share	$	0.41	$	0.95	$	1.35	$	1.50
Diluted earnings per common share	$	0.41	$	0.95	$	1.34	$	1.50
Weighted average common shares	545,818		549,690		549,434		391,699
Diluted average common shares	549,819		550,846		554,199		392,713



	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions) (Unaudited)	2021		2020		2021		2020
Net income	$	235	$	539	$	781	$	612
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale	(38)		(5)		(103)		82
Net unrealized gains (losses) on cash flow hedges	(1)		(3)		(5)		10
Net unrealized gains (losses) on pension and other postretirement plans	1		2		7		7
Other comprehensive income (loss)	(38)		(6)		(101)		99
Comprehensive income	197		533		680		711
Comprehensive income attributable to noncontrolling interest	3		3		9		8
Comprehensive income attributable to controlling interest	$	194	$	530	$	671	$	703
Income tax expense (benefit) of items included in other comprehensive income:
Net unrealized gains (losses) on securities available for sale	$	(12)	$	(2)	$	(33)	$	26
Net unrealized gains (losses) on cash flow hedges	—		(1)		(2)		3
Net unrealized gains (losses) on pension and other postretirement plans	1		2		2		4




Nine Months Ended September 30, 2021
	Preferred Stock			Common Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)	Shares	Amount		Shares	Amount		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss) (a)		Noncontrolling Interest		Total
Balance, December 31, 2020	26,250	$	470	555,031	$	347	$	5,074	$	2,261	$	(140)	$	295	$	8,307


Net income	—	—		—	—		—		233		—		3		236
Other comprehensive income (loss)	—	—		—	—		—		—		(101)		—		(101)
Comprehensive income (loss)	—	—		—	—		—		233		(101)		3		135
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(84)		—		—		(84)
Common stock repurchased (b)	—	—		(3,864)	(2)		(60)		—		—		—		(62)
Common stock issued for:
Stock options and restricted stock - equity awards	—	—		1,208	—		12		—		—		—		12
Stock-based compensation expense	—	—		—	—		10		—		—		—		10
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, March 31, 2021	26,250	470		552,375	345		5,036		2,402		(241)		295		8,307
Net income	—	—		—	—		—		308		—		3		311
Other comprehensive income (loss)	—	—		—	—		—		—		38		—		38
Comprehensive income (loss)	—	—		—	—		—		308		38		3		349
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(85)		—		—		(85)
Preferred stock issuance (1,500 shares issued at $100,000 per share net of offering costs)	1,500	145		—	—		—		—		—		—		145
Call of preferred stock	(1,000)	(95)		—	—		—		(5)		—		—		(100)
Common stock repurchased (b)	—	—		(3,435)	(3)		(61)		—		—		—		(64)
Common stock issued for:
Stock options and restricted stock - equity awards	—	—		1,925	2		11		—		—		—		13
Stock-based compensation expense	—	—		—	—		11		—		—		—		11
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, June 30, 2021	26,750	520		550,865	344		4,997		2,612		(203)		295		8,565
Net income	—	—		—	—		—		232		—		3		235
Other comprehensive income (loss)	—	—		—	—		—		—		(38)		—		(38)
Comprehensive income (loss)	—	—		—	—		—		232		(38)		3		197
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(83)		—		—		(83)

Common stock repurchased (b)	—	—		(9,235)	(5)		(141)		—		—		—		(146)
Common stock issued for:
Stock options and restricted stock - equity awards	—	—		230	—		—		—		—		—		—

Stock-based compensation expense	—	—		—	—		10		—		—		—		10
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, September 30, 2021	26,750	$	520	541,860	$	339	$	4,866	$	2,753	$	(241)	$	295	$	8,532




Three months ended March 31, 2021
	Preferred Stock			Common Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)	Shares	Amount		Shares	Amount		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss) (a)		Noncontrolling Interest		Total
Balance, December 31, 2020	26,250	$	470	555,031	$	347	$	5,074	$	2,261	$	(140)	$	295	$	8,307


Net income	—	—		—	—		—		233		—		3		236
Other comprehensive income (loss)	—	—		—	—		—		—		(101)		—		(101)
Comprehensive income (loss)	—	—		—	—		—		233		(101)		3		135
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(84)		—		—		(84)
Common stock repurchased (b)	—	—		(3,864)	(2)		(60)		—		—		—		(62)
Common stock issued for:
Stock options and restricted stock - equity awards	—	—		1,208	0		12		—		—		—		12
Stock-based compensation expense	—	—		—	—		10		—		—		—		10
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, March 31, 2021	26,250	$	470	552,375	$	345	$	5,036	$	2,402	$	(241)	$	295	$	8,307


Three months ended March 31, 2020
Nine Months Ended September 30, 2020																		Nine Months Ended September 30, 2020
		Preferred Stock			Common Stock														Preferred Stock			Common Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)	(Dollars in millions, except per share data; shares in thousands) (unaudited)	Shares	Amount		Shares	Amount		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss) (a)		Noncontrolling Interest		Total		(Dollars in millions, except per share data; shares in thousands) (unaudited)	Shares	Amount		Shares	Amount		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss) (a)		Noncontrolling Interest		Total
Balance, December 31, 2019	Balance, December 31, 2019	1,000	$	96	311,469	$	195	$	2,931	$	1,798	$	(239)	$	295	$	5,076	Balance, December 31, 2019	1,000	$	96	311,469	$	195	$	2,931	$	1,798	$	(239)	$	295	$	5,076
Adjustment to reflect adoption of ASU 2016-13	Adjustment to reflect adoption of ASU 2016-13	—	—		—	—		—		(96)		—		—		(96)		Adjustment to reflect adoption of ASU 2016-13	—	—		—	—		—		(96)		—		—		(96)
Beginning balance, as adjusted	Beginning balance, as adjusted	1,000	96		311,469	195		2,931		1,702		(239)		295		4,980		Beginning balance, as adjusted	1,000	96		311,469	195		2,931		1,702		(239)		295		4,980
Net income	Net income	—	—		—	—		—		13		—		3		16		Net income	—	—		—	—		—		13		—		3		16
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		—		—		104		—		104		Other comprehensive income (loss)	—	—		—	—		—		—		104		—		104
Comprehensive income (loss)	Comprehensive income (loss)	—	—		—	—		—		13		104		3		120		Comprehensive income (loss)	—	—		—	—		—		13		104		3		120
Cash dividends declared:	Cash dividends declared:																	Cash dividends declared:
Preferred stock ($1,550 per share)	Preferred stock ($1,550 per share)	—	—		—	—		—		(1)		—		—		(1)		Preferred stock ($1,550 per share)	—	—		—	—		—		(1)		—		—		(1)
Common stock ($0.15 per share)	Common stock ($0.15 per share)	—	—		—	—		—		(48)		—		—		(48)		Common stock ($0.15 per share)	—	—		—	—		—		(48)		—		—		(48)
Common stock repurchased	Common stock repurchased	—	—		(141)	0		(2)		—		—		—		(2)		Common stock repurchased	—	—		(141)	—		(2)		—		—		—		(2)
Common stock issued for:	Common stock issued for:																	Common stock issued for:
Stock options and restricted stock - equity awards	Stock options and restricted stock - equity awards	—	—		652	0		4		—		—		—		4		Stock options and restricted stock - equity awards	—	—		652	—		4		—		—		—		4
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		7		—		—		—		7		Stock-based compensation expense	—	—		—	—		7		—		—		—		7
Dividends declared - noncontrolling interest of subsidiary preferred stock	Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)		Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)
Other (b)	Other (b)	—	—		(117)	0		(1)		—		—		—		(1)		Other (b)	—	—		(117)	—		(1)		—		—		—		(1)
Balance, March 31, 2020	Balance, March 31, 2020	1,000	$	96	311,863	$	195	$	2,939	$	1,666	$	(135)	$	295	$	5,056	Balance, March 31, 2020	1,000	96		311,863	195		2,939		1,666		(135)		295		5,056
Net income																		Net income	—	—		—	—		—		54		—		3		57
Other comprehensive income (loss)																		Other comprehensive income (loss)	—	—		—	—		—		—		1		—		1
Comprehensive income (loss)																		Comprehensive income (loss)	—	—		—	—		—		54		1		3		58
Cash dividends declared:																		Cash dividends declared:
Preferred stock ($1,550 per share)																		Preferred stock ($1,550 per share)	—	—		—	—		—		(2)		—		—		(2)
Common stock ($0.15 per share)																		Common stock ($0.15 per share)	—	—		—	—		—		(47)		—		—		(47)
Preferred stock issuance (1,500 shares issued at 100,000 per share net of offering costs)																		Preferred stock issuance (1,500 shares issued at 100,000 per share net of offering costs)	1,500	144		—	—		—		—		—		—		144
Common stock repurchased																		Common stock repurchased	—	—		(183)	—		(1)		—		—		—		(1)
Common stock issued for:																		Common stock issued for:
Stock options and restricted stock - equity awards																		Stock options and restricted stock - equity awards	—	—		679	—		—		—		—		—		—

Stock-based compensation expense																		Stock-based compensation expense	—	—		—	—		3		—		—		—		3
Dividends declared - noncontrolling interest of subsidiary preferred stock																		Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)
Balance, June 30, 2020																		Balance, June 30, 2020	2,500	240		312,359	195		2,941		1,671		(134)		295		5,208
Net income																		Net income	—	—		—	—		—		536		—		3		539
Other comprehensive income (loss)																		Other comprehensive income (loss)	—	—		—	—		—		—		(6)		—		(6)
Comprehensive income (loss)																		Comprehensive income (loss)	—	—		—	—		—		536		(6)		3		533
Cash dividends declared:																		Cash dividends declared:
Preferred stock																		Preferred stock	—	—		—	—		—		(13)		—		—		(13)
Common stock ($0.15 per share)																		Common stock ($0.15 per share)	—	—		—	—		—		(83)		—		—		(83)
Common stock repurchased																		Common stock repurchased	—	—		(88)	—		(1)		—		—		—		(1)
Common stock issued for:																		Common stock issued for:
Stock options and restricted stock - equity awards																		Stock options and restricted stock - equity awards	—	—		138	—		—		—		—		—		—
Issued in business combination																		Issued in business combination	23,750	230		243,015	152		2,115		—		—		—		2,497
Stock-based compensation expense																		Stock-based compensation expense	—	—		—	—		12		—		—		—		12
Dividends declared - noncontrolling interest of subsidiary preferred stock																		Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)
Other (c)																		Other (c)	—	—		(636)	—		(6)		—		—		—		(6)
Balance, September 30, 2020																		Balance, September 30, 2020	26,250	$	470	554,788	$	347	$	5,061	$	2,111	$	(140)	$	295	$	8,144


		Three months ended March 31,					Nine months ended September 30,
(Dollars in millions) (Unaudited)	(Dollars in millions) (Unaudited)	2021		2020		(Dollars in millions) (Unaudited)	2021		2020
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	236	$	16	Net income	$	781	$	612
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision (provision credit) for credit losses		(45)		154
Provision for credit losses						Provision for credit losses	(245)		502
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	(3)		(19)		Deferred income tax expense (benefit)	(28)		(82)
Depreciation and amortization of premises and equipment	Depreciation and amortization of premises and equipment	16		11		Depreciation and amortization of premises and equipment	46		37
Amortization of intangible assets	Amortization of intangible assets	14		5		Amortization of intangible assets	42		25
Net other amortization and accretion	Net other amortization and accretion	(14)		4		Net other amortization and accretion	(50)		(18)
Net (increase) decrease in derivatives	Net (increase) decrease in derivatives	322		(324)		Net (increase) decrease in derivatives	309		(325)

Purchase accounting gain						Purchase accounting gain	1		(532)
Stock-based compensation expense	Stock-based compensation expense	10		7		Stock-based compensation expense	31		23

Securities (gains) losses, net						Securities (gains) losses, net	(12)		2
Loss on debt extinguishment						Loss on debt extinguishment	23		—
Net (gains) losses on sale/disposal of fixed assets	Net (gains) losses on sale/disposal of fixed assets	34		0		Net (gains) losses on sale/disposal of fixed assets	32		7

(Gain) loss on BOLI						(Gain) loss on BOLI	(5)		(4)
Loans held for sale:	Loans held for sale:					Loans held for sale:
Purchases and originations	Purchases and originations	(943)		(588)		Purchases and originations	(4,682)		(2,780)
Gross proceeds from settlements and sales	Gross proceeds from settlements and sales	683		181		Gross proceeds from settlements and sales	3,288		1,578

(Gain) loss due to fair value adjustments and other	(Gain) loss due to fair value adjustments and other	(35)		(1)		(Gain) loss due to fair value adjustments and other	(142)		(43)

Other operating activities, net	Other operating activities, net	789		(846)		Other operating activities, net	1,179		725
Total adjustments	Total adjustments	828		(1,416)		Total adjustments	(213)		(885)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	1,064		(1,400)		Net cash provided by (used in) operating activities	568		(273)
Investing Activities	Investing Activities					Investing Activities

Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	26		9		Proceeds from sales of securities available for sale	68		249
Proceeds from maturities of securities available for sale	Proceeds from maturities of securities available for sale	591		224		Proceeds from maturities of securities available for sale	1,680		2,993
Purchases of securities available for sale	Purchases of securities available for sale	(1,065)		(214)		Purchases of securities available for sale	(2,343)		(3,166)

Purchases of securities held to maturity						Purchases of securities held to maturity	(304)		—
Proceeds from prepayments of securities held to maturity						Proceeds from prepayments of securities held to maturity	10		—
Proceeds from sales of premises and equipment	Proceeds from sales of premises and equipment	1		2		Proceeds from sales of premises and equipment	22		9
Purchases of premises and equipment	Purchases of premises and equipment	(10)		(8)		Purchases of premises and equipment	(46)		(35)

Proceeds from BOLI	Proceeds from BOLI	1		2		Proceeds from BOLI	12		8

Net increase in loans and leases		(338)		(2,312)
Net (increase) decrease in loans and leases						Net (increase) decrease in loans and leases	2,891		(2,310)

Net increase in interest-bearing deposits with banks	Net increase in interest-bearing deposits with banks	(3,284)		(188)		Net increase in interest-bearing deposits with banks	(6,478)		(3,013)

Cash received for acquisitions, net						Cash received for acquisitions, net	—		1,806
Other investing activities, net	Other investing activities, net	6		3		Other investing activities, net	15		10
Net cash used in investing activities	Net cash used in investing activities	(4,072)		(2,482)		Net cash used in investing activities	(4,473)		(3,449)
Financing Activities	Financing Activities					Financing Activities
Common stock:	Common stock:					Common stock:
Stock options exercised	Stock options exercised	12		4		Stock options exercised	25		4
Cash dividends paid	Cash dividends paid	(84)		(44)		Cash dividends paid	(252)		(139)
Repurchase of shares	Repurchase of shares	(62)		(2)		Repurchase of shares	(272)		(4)
Cancellation of common shares	Cancellation of common shares	0		(2)		Cancellation of common shares	—		(8)
Preferred stock:						Preferred stock:
Preferred stock issuance						Preferred stock issuance	145		145

Cash dividends paid - preferred stock - noncontrolling interest	Cash dividends paid - preferred stock - noncontrolling interest	(3)		(3)		Cash dividends paid - preferred stock - noncontrolling interest	(9)		(9)
Cash dividends paid - preferred stock	Cash dividends paid - preferred stock	(8)		(2)		Cash dividends paid - preferred stock	(24)		(8)

Net increase in deposits	Net increase in deposits	3,190		1,990		Net increase in deposits	4,287		5,561
Net increase in short-term borrowings		4		1,807
Net increase (decrease) in short-term borrowings						Net increase (decrease) in short-term borrowings	27		(1,585)
Proceeds from issuance of term borrowings						Proceeds from issuance of term borrowings	—		1,241

Increases (decreases) in restricted and secured term borrowings		0		(3)
Increases (decreases) in term borrowings						Increases (decreases) in term borrowings	(112)		(1,075)
Net cash provided by financing activities	Net cash provided by financing activities	3,049		3,745		Net cash provided by financing activities	3,815		4,123
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	41		(137)		Net increase (decrease) in cash and cash equivalents	(90)		401
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	1,648		1,267		Cash and cash equivalents at beginning of period	1,648		1,267
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,689	$	1,130	Cash and cash equivalents at end of period	$	1,558	$	1,668
Supplemental Disclosures	Supplemental Disclosures					Supplemental Disclosures
Total interest paid	Total interest paid	$	39	$	84	Total interest paid	$	128	$	181
Total taxes paid	Total taxes paid	2		5		Total taxes paid	254		90
Total taxes refunded	Total taxes refunded	4		0		Total taxes refunded	28		1
Transfer from loans to OREO	Transfer from loans to OREO	0		1		Transfer from loans to OREO	3		2
Transfer from loans HFS to trading securities	Transfer from loans HFS to trading securities	498		398		Transfer from loans HFS to trading securities	1,490		1,083
Transfer from loans to loans HFS	Transfer from loans to loans HFS	(3)		0		Transfer from loans to loans HFS	(31)		4



(Dollars in millions)	IBERIABANK Corporation
Assets:
Cash and due from banks	$	395
Interest-bearing deposits with banks	1,683
Securities available for sale at fair value	3,544
Loans held for sale	320
Loans and leases (a)	25,921
Allowance for loan and lease losses	(284)
Other intangible assets	240
Premises and equipment	311
OREO	9
Other assets	~~1,156~~1,153
Total assets acquired	$	~~33,295~~33,292
Liabilities:
Deposits	$	28,232
Short-term borrowings	209
Term borrowings	1,200
Other liabilities	618
Total liabilities assumed	$	30,259
Net assets acquired	$	~~3,036~~3,033
Consideration paid:
Consideration for outstanding common stock	$	2,243
Consideration for equity awards	28
Consideration for preferred stock	231

Total consideration paid	$	2,502
~~Preliminary purchase~~Purchase accounting gain	$	~~(534)~~(531)


	December 31, 2020
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. treasuries	$	613	$	0	$	0	$	613
Government agency issued MBS	3,722		92		(2)		3,812
Government agency issued CMO	2,380		29		(3)		2,406
Other U.S. government agencies	672		12		0		684
Corporate and other debt	40		1		(1)		40
States and municipalities	445		15		0		460
	$	7,872	$	149	$	(6)	8,015
AFS securities recorded at fair value through earnings:
SBA-interest only strips (a)							32
Total securities available for sale (b)							$	8,047


		As of March 31, 2021													As of September 30, 2021
		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
(Dollars in millions)	(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Government agency issued MBS	Government agency issued MBS	$	1,772	$	(39)	$	0	$	0	$	1,772	$	(39)	Government agency issued MBS	$	2,101	$	(33)	$	99	$	(4)	$	2,200	$	(37)
Government agency issued CMO	Government agency issued CMO	1,508		(41)		0		0		1,508		(41)		Government agency issued CMO	1,243		(25)		179		(6)		1,422		(31)
Other U.S. government agencies	Other U.S. government agencies	405		(13)		0		0		405		(13)		Other U.S. government agencies	495		(12)		—		—		495		(12)

States and municipalities	States and municipalities	82		(1)		0		0		82		(1)		States and municipalities	107		(1)		—		—		107		(1)
Total	Total	$	3,767	$	(94)	$	0	$	0	$	3,767	$	(94)	Total	$	3,946	$	(71)	$	278	$	(10)	$	4,224	$	(81)


		As of December 31, 2020													As of December 31, 2020
		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
(Dollars in millions)	(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. treasuries	U.S. treasuries	$	307	$	0	$	0	$	0	$	307	$	0	U.S. treasuries	$	307	$	—	$	—	$	—	$	307	$	—
Government agency issued MBS	Government agency issued MBS	426		(2)		0		0		426		(2)		Government agency issued MBS	426		(2)		—		—		426		(2)
Government agency issued CMO	Government agency issued CMO	586		(3)		0		0		586		(3)		Government agency issued CMO	586		(3)		—		—		586		(3)
Other U.S. government agencies	Other U.S. government agencies	80		(1)		0		0		80		(1)		Other U.S. government agencies	80		(1)		—		—		80		(1)

States and municipalities	States and municipalities	1		0		0		0		1		0		States and municipalities	1		—		—		—		1		—
Total	Total	$	1,400	$	(6)	$	0	$	0	$	1,400	$	(6)	Total	$	1,400	$	(6)	$	—	$	—	$	1,400	$	(6)


	March 31, 2021
	Consumer Real Estate
(Dollars in millions)	2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving Loans converted to term loans (a)		Total
FICO score 740 or greater	$	131	$	1,195	$	1,060	$	613	$	529	$	2,230	$	1,200	$	150	$	7,108
FICO score 720-739	8		163		142		91		69		249		179		27		928
FICO score 700-719	15		129		103		75		72		267		173		31		865
FICO score 660-699	13		121		120		115		69		329		238		53		1,058
FICO score 620-659	1		40		57		31		21		134		83		35		402
FICO score less than 620	108		58		32		41		50		302		56		45		692
Total	$	276	$	1,706	$	1,514	$	966	$	810	$	3,511	$	1,929	$	341	$	11,053


		March 31, 2021																			September 30, 2021
		Accruing								Non-Accruing											Accruing								Non-Accruing
(Dollars in millions)	(Dollars in millions)	Current		30-89 Days Past Due		90+ Days Past Due		Total Accruing		Current		30-89 Days Past Due		90+ Days Past Due		Total Non- Accruing		Total Loans		(Dollars in millions)	Current		30-89 Days Past Due		90+ Days Past Due		Total Accruing		Current		30-89 Days Past Due		90+ Days Past Due		Total Non- Accruing		Total Loans and Leases
Commercial, financial, and industrial:	Commercial, financial, and industrial:																			Commercial, financial, and industrial:
C&I (a) (b)		$	28,251	$	26	$	0	$	28,277	$	102	$	7	$	35	$	144	$	28,421
C&I (a)																				C&I (a)	$	26,196	$	36	$	1	$	26,233	$	119	$	9	$	16	$	144	$	26,377

Loans to mortgage companies	Loans to mortgage companies	5,530		0		0		5,530		0		0		0		0		5,530		Loans to mortgage companies	5,139		—		—		5,139		—		—		—		—		5,139

Total commercial, financial, and industrial	Total commercial, financial, and industrial	33,781		26		0		33,807		102		7		35		144		33,951		Total commercial, financial, and industrial	31,335		36		1		31,372		119		9		16		144		31,516
Commercial real estate:	Commercial real estate:																			Commercial real estate:
CRE(b)	CRE(b)	12,392		11		0		12,403		20		3		44		67		12,470		CRE(b)	12,120		15		1		12,136		8		—		50		58		12,194

Consumer real estate:	Consumer real estate:																			Consumer real estate:
HELOC(c)	HELOC(c)	2,198		6		9		2,213		43		2		12		57		2,270		HELOC(c)	1,979		5		7		1,991		37		2		11		50		2,041
Real estate installment loans(d)	Real estate installment loans(d)	8,623		33		4		8,660		72		8		43		123		8,783		Real estate installment loans(d)	8,625		23		5		8,653		51		4		38		93		8,746
Total consumer real estate	Total consumer real estate	10,821		39		13		10,873		115		10		55		180		11,053		Total consumer real estate	10,604		28		12		10,644		88		6		49		143		10,787
Credit card and other:	Credit card and other:																			Credit card and other:
Credit card	Credit card	273		2		0		275		0		0		0		0		275		Credit card	274		3		2		279		—		—		—		—		279
Other	Other	845		3		0		848		1		1		1		3		851		Other	656		1		—		657		—		1		1		2		659
Total credit card and other	Total credit card and other	1,118		5		0		1,123		1		1		1		3		1,126		Total credit card and other	930		4		2		936		—		1		1		2		938
Total loans and leases	Total loans and leases	$	58,112	$	81	$	13	$	58,206	$	238	$	21	$	135	$	394	$	58,600	Total loans and leases	$	54,989	$	83	$	16	$	55,088	$	215	$	16	$	116	$	347	$	55,435


		Three Months Ended March 31, 2021					Three Months Ended March 31, 2020					Three Months Ended September 30, 2021			Three Months Ended September 30, 2020
(Dollars in millions)	(Dollars in millions)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment			(Dollars in millions)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial, financial, and industrial:

C&I	C&I	17	$	8	$	8	3	$	6	$	4		C&I	5	$	8	$	7	83	$	130	$	120

Commercial real estate:

CRE	CRE	1	12		10		0	0		0			CRE	—	—		—		14	12		12

Consumer real estate:

HELOC	HELOC	12	2		2		8	1		1			HELOC	2	—		—		35	3		2
Real estate installment loans	Real estate installment loans	9	2		2		10	2		2			Real estate installment loans	6	—		—		44	6		6
Total consumer real estate		21	4		4		18	3		3

Credit card and other	Credit card and other	13	0		0		24	0		0			Credit card and other	8	—		—		10	—		—
Total TDRs	Total TDRs	52	$	24	$	22	45	$	9	$	7		Total TDRs	21	$	8	$	7	186	$	151	$	140

														Nine Months Ended September 30, 2021					Nine Months Ended September 30, 2020
(Dollars in millions)													(Dollars in millions)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

C&I													C&I	32	$	37	$	34	87	$	141	$	129

CRE													CRE	1	12		10		14	12		12

HELOC													HELOC	21	2		2		47	4		4
Real estate installment loans													Real estate installment loans	41	8		8		94	15		15

Credit card and other													Credit card and other	36	—		—		50	—		—
Total TDRs													Total TDRs	131	$	59	$	54	292	$	172	$	160


(Dollars in millions)	Commercial, Financial, and Industrial (a)		Commercial Real Estate		Consumer Real Estate		Credit Card and Other		Total
Allowance for loan and lease losses:
















Balance as of January 1, 2021	$	453	$	242	$	242	$	26	$	963
Charge-offs	(16)		(3)		(1)		(3)		(23)
Recoveries	6		2		6		1		15

Provision (provision credit) for loan and lease losses	(1)		(8)		(25)		(6)		(41)
Balance as of March 31, 2021	$	442	$	232	$	222	$	18	$	914

Reserve for remaining unfunded commitments:
Balance as of January 1, 2021	$	65	$	10	$	10	$	0	$	85

Provision (provision credit) for remaining unfunded commitments	(3)		1		(2)		0		(4)
Balance as of March 31, 2021	$	62	$	11	$	8	$	0	$	81





















Allowance for loan losses:
Balance as of January 1, 2020, as adjusted (b)	$	142	$	29	$	121	$	15	$	307

Charge-offs	(7)		(1)		(2)		(4)		(14)
Recoveries	1		1		3		1		6
Provision for loan losses	119		19		0		7		145
Balance as of March 31, 2020	$	255	$	48	$	122	$	19	$	444

Reserve for remaining unfunded commitments:
Balance as of January 1, 2020, as adjusted (b)	$	21	$	3	$	6	$	0	$	30

Provision for remaining unfunded commitments	6		3		0		0		9
Balance as of March 31, 2020	$	27	$	6	$	6	$	0	$	39


	March 31, 2021
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Mortgage servicing rights	$	31	$	(4)	$	27


(Dollars in millions)	(Dollars in millions)	Regional Banking		Specialty Banking		Total		(Dollars in millions)	Regional Banking		Specialty Banking		Total
December 31, 2019	December 31, 2019	$	802	$	631	$	1,433	December 31, 2019	$	802	$	631	$	1,433
Additions	Additions	78		0		78		Additions	78		—		78
December 31, 2020	December 31, 2020	$	880	$	631	$	1,511	December 31, 2020	$	880	$	631	$	1,511

December 31, 2020		$	880	$	631	$	1,511

Additions and adjustments	Additions and adjustments	0		0		0		Additions and adjustments	—		—		—
March 31, 2021		$	880	$	631	$	1,511
September 30, 2021								September 30, 2021	$	880	$	631	$	1,511


(Dollars in millions)										(Dollars in millions)	Securities AFS		Cash Flow Hedges		Pension and Post-retirement Plans		Total
Balance as of July 1, 2021										Balance as of July 1, 2021	$	43	$	8	$	(254)	$	(203)
Net unrealized gains (losses)										Net unrealized gains (losses)	(38)		—		(3)		(41)
Amounts reclassified from AOCI										Amounts reclassified from AOCI	—		(1)		4		3
Other comprehensive income (loss)										Other comprehensive income (loss)	(38)		(1)		1		(38)
Balance as of September 30, 2021										Balance as of September 30, 2021	$	5	$	7	$	(253)	$	(241)

(Dollars in millions)	(Dollars in millions)	Securities AFS		Cash Flow Hedges		Pension and Post-retirement Plans		Total		(Dollars in millions)	Securities AFS		Cash Flow Hedges		Pension and Post-retirement Plans		Total
Balance as of January 1, 2021	Balance as of January 1, 2021	$	108	$	12	$	(260)	$	(140)	Balance as of January 1, 2021	$	108	$	12	$	(260)	$	(140)
Net unrealized gains (losses)	Net unrealized gains (losses)	(103)		(3)		2		(104)		Net unrealized gains (losses)	(103)		(1)		(4)		(108)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		1		2		3		Amounts reclassified from AOCI	—		(4)		11		7
Other comprehensive income (loss)	Other comprehensive income (loss)	(103)		(2)		4		(101)		Other comprehensive income (loss)	(103)		(5)		7		(101)
Balance as of March 31, 2021		$	5	$	10	$	(256)	$	(241)

Balance as of September 30, 2021										Balance as of September 30, 2021	$	5	$	7	$	(253)	$	(241)


(Dollars in millions)	Three Months Ended March 31,
Details about AOCI	2021		2020		Affected line item in the statement where net income is presented




Cash flow hedges:
Realized (gains) losses on cash flow hedges	$	2	$	0	Interest and fees on loans and leases
Tax expense (benefit)	(1)		0		Income tax expense
	1		0
Pension and Postretirement Plans:
Amortization of prior service cost and net actuarial (gain) loss	4		3		All other expense
Tax expense (benefit)	(2)		(1)		Income tax expense
	2		2
Total reclassification from AOCI	$	3	$	2


		Pension Benefits
(Dollars in millions)	(Dollars in millions)	2021		2020		(Dollars in millions)	2021		2020
Components of net periodic benefit cost	Components of net periodic benefit cost					Components of net periodic benefit cost

Interest cost	Interest cost	$	4	$	6	Interest cost	$	4	$	6
Expected return on plan assets	Expected return on plan assets	(4)		(6)		Expected return on plan assets	(7)		(7)
Amortization of unrecognized:	Amortization of unrecognized:					Amortization of unrecognized:

Actuarial (gain) loss	Actuarial (gain) loss	2		3		Actuarial (gain) loss	2		3
Other		2		0

Net periodic benefit cost	Net periodic benefit cost	$	4	$	3	Net periodic benefit cost	$	(1)	$	2


		Three Months Ended March 31, 2021
(Dollars in millions)		Regional Banking		Specialty Banking		Corporate		Consolidated
Net interest income (expense)		$	426	$	159	$	(77)	$	508
Provision for credit losses		(32)		(7)		(6)		(45)
Noninterest income		100		185		13		298
Noninterest expense (a)		272		154		118		544
Income (loss) before income taxes		286		197		(176)		307
Income tax expense (benefit)		66		47		(42)		71
Net income (loss)		$	220	$	150	$	(134)	$	236
Average assets		$	42,371	$	21,503	$	21,527	$	85,401
(a) Includes $33 million in asset impairments related to IBKC merger integration efforts in the Corporate segment.
		Three Months Ended March 31, 2020									Three Months Ended September 30, 2021
(Dollars in millions)	(Dollars in millions)	Regional Banking		Specialty Banking		Corporate		Consolidated		(Dollars in millions)	Regional Banking		Specialty Banking		Corporate		Consolidated
Net interest income (expense)	Net interest income (expense)	$	194	$	109	$	0	$	303	Net interest income (expense)	$	444	$	154	$	(106)	$	492
Provision for credit losses	Provision for credit losses	98		54		2		154		Provision for credit losses	(52)		(33)		—		(85)
Noninterest income	Noninterest income	73		104		(3)		174		Noninterest income	112		142		(7)		247
Noninterest expense	Noninterest expense	173		111		18		302		Noninterest expense	301		141		84		526
Income (loss) before income taxes	Income (loss) before income taxes	(4)		48		(23)		21		Income (loss) before income taxes	307		188		(197)		298
Income tax expense (benefit)	Income tax expense (benefit)	(2)		11		(4)		5		Income tax expense (benefit)	72		45		(54)		63
Net income (loss)	Net income (loss)	$	(2)	$	37	$	(19)	$	16	Net income (loss)	$	235	$	143	$	(143)	$	235
Average assets	Average assets	$	19,044	$	16,890	$	7,618	$	43,552	Average assets	$	40,722	$	20,460	$	27,219	$	88,401

											Three Months Ended September 30, 2020
(Dollars in millions)										(Dollars in millions)	Regional Banking		Specialty Banking		Corporate		Consolidated
Net interest income (expense)										Net interest income (expense)	$	448	$	161	$	(77)	$	532
Provision for credit losses										Provision for credit losses	194		34		(1)		227
Noninterest income										Noninterest income	97		181		545		823
Noninterest expense										Noninterest expense	301		138		148		587
Income (loss) before income taxes										Income (loss) before income taxes	50		170		321		541
Income tax expense (benefit)										Income tax expense (benefit)	9		41		(48)		2
Net income (loss)										Net income (loss)	$	41	$	129	$	369	$	539
Average assets										Average assets	$	43,703	$	21,693	$	16,287	$	81,683


(Dollars in millions)	(Dollars in millions)	Maximum Loss Exposure		Liability Recognized		Classification	(Dollars in millions)	Maximum Loss Exposure		Liability Recognized		Classification
Type	Type						Type
Low income housing partnerships	Low income housing partnerships	$	345	$	126	(a)	Low income housing partnerships	$	349	$	116	(a)
Other tax credit investments (b)	Other tax credit investments (b)	68		42		Other assets	Other tax credit investments (b)	63		42		Other assets
Small issuer trust preferred holdings (c)	Small issuer trust preferred holdings (c)	210		0		Loans and leases	Small issuer trust preferred holdings (c)	202		—		Loans and leases
On-balance sheet trust preferred securitization	On-balance sheet trust preferred securitization	32		83		(d)	On-balance sheet trust preferred securitization	30		84		(d)

Holdings of agency mortgage-backed securities (c)	Holdings of agency mortgage-backed securities (c)	7,053		0		(e)	Holdings of agency mortgage-backed securities (c)	7,380		—		(e)
Commercial loan troubled debt restructurings (f)	Commercial loan troubled debt restructurings (f)	169		0		Loans and leases	Commercial loan troubled debt restructurings (f)	117		—		Loans and leases

Proprietary trust preferred issuances (g)	Proprietary trust preferred issuances (g)	0		287		Term borrowings	Proprietary trust preferred issuances (g)	—		184		Term borrowings


								Gross amounts not offset in the Balance Sheets													Gross amounts not offset in the Balance Sheets
(Dollars in millions)	(Dollars in millions)	Gross amounts of recognized assets		Gross amounts offset in the Balance Sheets		Net amounts of assets presented in the Balance Sheets		Offsetting securities sold under agreements to repurchase		Securities collateral (not recognized on FHN’s Balance Sheets)		Net amount		(Dollars in millions)	Gross amounts of recognized assets		Gross amounts offset in the Balance Sheets		Net amounts of assets presented in the Balance Sheets		Offsetting securities sold under agreements to repurchase		Securities collateral (not recognized on FHN’s Balance Sheets)		Net amount
Securities purchased under agreements to resell:	Securities purchased under agreements to resell:													Securities purchased under agreements to resell:
March 31, 2021		$	463	$	0	$	463	$	0	$	(461)	$	2
September 30, 2021														September 30, 2021	$	355	$	—	$	355	$	(12)	$	(341)	$	2
December 31, 2020	December 31, 2020	380		0		380		0		(379)		1		December 31, 2020	380		—		380		—		(379)		1


	March 31, 2021
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Trading securities:
U.S. treasuries	$	0	$	51	$	0	$	51
Government agency issued MBS	0		384		0		384
Government agency issued CMO	0		190		0		190
Other U.S. government agencies	0		237		0		237
States and municipalities	0		10		0		10
Corporate and other debt	0		204		0		204

Total trading securities	0		1,076		0		1,076

Loans held for sale (elected fair value)	0		437		12		449
Loans held for investment (elected fair value)	0		0		17		17
Securities available for sale:
U.S. treasuries	0		610		0		610
Government agency issued MBS	0		4,038		0		4,038
Government agency issued CMO	0		2,441		0		2,441
Other U.S. government agencies	0		725		0		725
States and municipalities	0		475		0		475
Corporate and other debt	0		40		0		40
Interest-only strips (elected fair value)	0		0		22		22
Total securities available for sale	0		8,329		22		8,351
Other assets:
Deferred compensation mutual funds	122		0		0		122
Equity, mutual funds, and other	25		0		0		25
Derivatives, forwards and futures	145		0		0		145
Derivatives, interest rate contracts	0		414		0		414
Derivatives, other	0		2		0		2
Total other assets	292		416		0		708
Total assets	$	292	$	10,258	$	51	$	10,601
Trading liabilities:
U.S. treasuries	$	0	$	361	$	0	$	361
Other U.S.government agencies	0		20		0		20

Government agency issued MBS	0		8		0		8

Corporate and other debt	0		65		0		65

Total trading liabilities	0		454		0		454
Other liabilities:
Derivatives, forwards and futures	116		0		0		116
Derivatives, interest rate contracts	0		128		0		128
Derivatives, other	0		2		21		23
Total other liabilities	116		130		21		267
Total liabilities	$	116	$	584	$	21	$	721


	Nine Months Ended September 30, 2021
(Dollars in millions)	Interest- only strips- AFS			Loans held for sale			Loans held for investment			Net derivative liabilities
Balance on January 1, 2021	$	32		$	12		$	16		$	(14)


Total net gains (losses) included in net income	5			2			—			(9)
Purchases	—			8			—			—
Sales	(68)			(18)			—			—
Settlements	—			(2)			(2)			7
Net transfers into (out of) Level 3	47		(b)	22		(e)	(14)		(e)	—
Balance on September 30, 2021	$	16		$	24		$	—		$	(16)
Net unrealized gains (losses) included in net income	$	—	(c)	$	2	(a)	$	—		$	(9)	(d)


	Nine Months Ended September 30, 2020
(Dollars in millions)	Trading securities			Interest-only-strips-AFS			Loans held for sale			Loans held for investment		Net derivative liabilities
Balance on January 1, 2020	$	1		$	19		$	14		$	—	$	(23)
Acquired	—			—			—			13		—
Total net gains (losses) included in net income	—			(4)			1			—		(1)
Purchases	—			5			—			—		—
Sales	—			(8)			—			(3)		—
Settlements	—			—			(3)			(2)		7
Net transfers into (out of) Level 3	—			21		(b)	—			4		—
Balance on September 30, 2020	$	1		$	33		$	12		$	12	$	(17)
Net unrealized gains (losses) included in net income	$	—	(a)	$	3	(c)	$	1	(a)	$	—	$	(1)	(d)


		Carrying value at March 31, 2021									Carrying value at September 30, 2021
(Dollars in millions)	(Dollars in millions)	Level 1		Level 2		Level 3		Total		(Dollars in millions)	Level 1		Level 2		Level 3		Total

Loans held for sale—SBAs and USDA	Loans held for sale—SBAs and USDA	$	0	$	299	$	1	$	300	Loans held for sale—SBAs and USDA	$	—	$	693	$	1	$	694
Loans held for sale—first mortgages	Loans held for sale—first mortgages	0		0		1		1		Loans held for sale—first mortgages	—		—		1		1
Loans and leases (a)	Loans and leases (a)	0		0		69		69		Loans and leases (a)	—		—		86		86
OREO (b)	OREO (b)	0		0		11		11		OREO (b)	—		—		6		6
Other assets (c)	Other assets (c)	0		0		11		11		Other assets (c)	—		—		10		10


		Carrying value at December 31, 2020									Carrying value at December 31, 2020
(Dollars in millions)	(Dollars in millions)	Level 1		Level 2		Level 3		Total		(Dollars in millions)	Level 1		Level 2		Level 3		Total

Loans held for sale—SBAs and USDA	Loans held for sale—SBAs and USDA	$	0	$	508	$	1	$	509	Loans held for sale—SBAs and USDA	$	—	$	508	$	1	$	509
Loans held for sale—first mortgages	Loans held for sale—first mortgages	0		0		1		1		Loans held for sale—first mortgages	—		—		1		1
Loans and leases (a)	Loans and leases (a)	0		0		77		77		Loans and leases (a)	—		—		77		77
OREO (b)	OREO (b)	0		0		15		15		OREO (b)	—		—		15		15
Other assets (c)	Other assets (c)	0		0		9		9		Other assets (c)	—		—		9		9


		Net gains (losses) Three Months Ended March 31				Net gains (losses) Three Months Ended September 30,				Net gains (losses) Nine Months Ended September 30,
(Dollars in millions)	(Dollars in millions)	2021		2020			(Dollars in millions)	2021		2020		2021		2020

Loans held for sale—SBAs and USDA	Loans held for sale—SBAs and USDA	$	(1)	$	(1)		Loans held for sale—SBAs and USDA	$	(2)	$	(2)	$	(3)	$	(3)

Loans and leases (a)	Loans and leases (a)	(7)		(5)			Loans and leases (a)	(9)		(17)		(12)		(31)
OREO (b)							OREO (b)	—		—		(1)		—
Other assets (c)							Other assets (c)	(2)		—		(2)		(1)
								$	(13)	$	(19)	$	(18)	$	(35)

		$	(8)	$	(6)